In Comparing an Ordinary Annuity and an Annuity Due,which of the Following

question 182

Multiple Choice

In comparing an ordinary annuity and an annuity due,which of the following is TRUE?

• A)The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.
• B)The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due.
• C)The present value of an annuity due is always less than the future value of an otherwise identical ordinary annuity,since one less payment is received with an annuity due.
• D)All things being equal,one would prefer to receive an ordinary annuity compared to an annuity due.

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Definitions:

Degrees of Freedom

The number of independent values or quantities which can vary in the calculation of a statistic.

Standard Error

A measure of the statistical accuracy of an estimate, often the standard deviation of the sampling distribution of a statistic.

Critical Values

These are threshold points on the scale of the test statistic that delineate the region where the null hypothesis is rejected, essential in determining the significance of the test outcome.

Alpha

The significance level, a threshold used in hypothesis testing indicating the probability of rejecting the null hypothesis when it is true.