Question

you have the choice of two equally risk​ annuities, each paying​ $5,000 per year for 8 years. one is an annuity due and the other is an ordinary annuity. if you are going to be receiving the annuity​ payments, which annuity would you choose to maximize your​ wealth?

Answer 1

You have the option of two equally risk​ annuity, each paying​ $5,000 per year for 8 years. The is an annuity due and the other is an ordinary annuity. If you are going to be receiving the annuity​ payments, the annuity due would you choose to maximize your​ wealth.

What is an Ordinary Annuity?

An ordinary annuity is a series of equal payment made at the end of consecutive periods over a fixed length of time. An standard annuity's payments can be paid as frequently as weekly, although in reality they are typically made monthly, quarterly, mid-annually, or yearly. An annuity due is the reverse of a Ordinary annuity in that payment are issued at the start of each period. Although they are connected, these two payments schedules differ from the financial instrument known as an annuity.

Learn more about Ordinary Annuity here:

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