Consider an ordinary annuity that pays out over 6 as well as an annuity due that also pays out over 6 periods. Assume th

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Consider An Ordinary Annuity That Pays Out Over 6 As Well As An Annuity Due That Also Pays Out Over 6 Periods Assume Th 1 (31.36 KiB) Viewed 12 times

Consider an ordinary annuity that pays out over 6 as well as an annuity due that also pays out over 6 periods. Assume that each of these annuities has the same interest rate. The ordinary annuity will have a smaller interest when compared to the annuity due. future value as the annuity due, because the ordinary annuity has fewer periods of earning Read the following text and answer the questions that follow. An annuity is a series of payments of fixed amounts that occur at regular intervals for a specific period of time. Recall from the previous stage of the problem that if these payments happen at the beginning of each period, the annuity is an annuity due. If the payments happen at the end of each period the annuity is an ordinary annuity. In practice, ordinary annuities are more commonly used. The future value of an annuity is the amount of cash you will have at the end of the life of the annuity. In other words, it is the amount to which the annuity payments will grow over a given period of time, if those payments can be compounded with an given interest rate. Given the interest rate 7, the amount per fixed payment PMT, and the number of periods N, the future value of an ordinary annuity (FVAN) can be calculated as: