Question

Explain what is meant by the present value of an ordinary annuity. Choose the correct answer below. A. It is the value of any single annuity payment. B. It is the sum of the paid balance on an annuity at the specified point in time. C. It is the value of the sum of all the annuity payments before any interest is earned. D. It is the value of the unpaid balance on an annuity at the specified point in time.

Answer 1

Answer:

Letter D is correct.  It is the value of the unpaid balance on an annuity at the specified point in time.

Explanation:

An ordinary annuity is the making of fixed payments over a fixed period of time. To specify the value of an annuity present in an ordinary annuity, one must know the established interest rates. When interest rates are higher, the present value of the ordinary annuity is reduced, and when interest rates are lower the present value is higher.