Consider the following cases.

Case	Amount of annuity	Interest rate	Period (years)
A	$ 12,000	7%	3
B	55,000	12	15
C	700	20	9
D	140,000	5	7
E	22,500	10	5

Calculate the present value of the annuity, assuming that it is

(1) An ordinary annuity.

(2) An annuity due.

Comparing the two types of annuities, all else equal, which type is more preferable? Why?

A. Ordinary annuity = 2822, annuity due = 3386, annuity due is better because it discounts for one less year.

B. Ordinary annuity = 3386, annuity due = 2282, ordinary annuity is better because it discounts for one less year.

C. Ordinary annuity = 2282, annuity due = 3386, annuity due is better because it compounds for one more year.

D. Ordinary annuity = 3386, annuity due = 2282, ordinary annuity is better because it compounds for one more year.

Answer rating: 100% (QA)

Present value of ordinary annuity payment per period 11ini i interest rate per ... View the full answer