Asked by Kanidra Stringer on Jul 14, 2024
Verified
The present values of ordinary annuities, annuities due, and deferred annuities were discussed in the textbook.Discuss the ways these three annuities are similar and dissimilar.
Ordinary Annuities
Fixed payments received or paid out over a designated series of periods where the payments occur at the end of each period.
Annuities Due
An annuity for which payments are made at the beginning of each period, rather than at the end.
Deferred Annuities
An insurance product that delays payments of income, installments, or a lump sum until the investor elects to receive them, which is usually during retirement.
- Analyze the differences and similarities among ordinary annuities, annuities due, and deferred annuities.
Verified Answer
BJ
Brigham JacobsonJul 17, 2024
Final Answer :
These annuities are similar in that all have equal periodic rents (cash flows)that occur in the future.Differences occur as to when those periodic rents begin.For ordinary annuities, the rents begin at the end of the first rent period.Rents, with an annuity due, begin at the beginning of the first rent period.Deferred annuities have cash flows that do not begin until at least the end of the second rent period.
Learning Objectives
- Analyze the differences and similarities among ordinary annuities, annuities due, and deferred annuities.