Question: Suppose you will receive $20,000 per year for five years. The interest rate is 7 percent. a. What is the PV of the payments if

Suppose you will receive $20,000 per year for five years. The interest rate is 7 percent.

a. What is the PV of the payments if they are in the form of an ordinary annuity? What is the PV if the payments are an annuity due?

b. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are an annuity due?

c. Which has the higher PV, the ordinary annuity or the annuity due? Which has the higher future value? Will this always be true?

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