ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Beginning of the period
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Middle of the period
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Three times during the period
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End of the period
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Detailed explanation-1: -An annuity due is an annuity in which the cash flows, or payments, occur at the beginning of the period. An annuity due is also called an annuity in arrears. The cash flows occur at the beginning of years 1 through 5. And the first cash flow occurs at time 0 (now).
Detailed explanation-2: -A period annuity is for a specific amount of time – perhaps 5, 10, 15 or 20 years. You’ll get a payout either monthly, quarterly or yearly for the length of that period. You can also purchase a lifetime annuity, which pays out for the rest of your life.
Detailed explanation-3: -An ordinary annuity is a series of regular payments made at the end of each period, such as monthly or quarterly. In an annuity due, by contrast, payments are made at the beginning of each period. Consistent quarterly stock dividends are one example of an ordinary annuity; monthly rent is an example of an annuity due.