Question

Which of the following is TRUE of​ annuities? A. An ordinary annuity is an equal payment paid or received at the end of each period that increases by an equal amount each period. B. An ordinary annuity is an equal payment paid or received at the beginning of each period. C. An annuity due is a payment paid or received at the beginning of each period that increases by an equal amount each period. D. An annuity due is an equal stream of cash flows that is paid or received at the beginning of each period.

Answer 1

Answer: Option D

Explanation: Annuity due refers to the chain of equal payments that is made at the end of a period usually one year. The payments do not increase over time.

While in case of ordinary annuity the payment is done at the end of the period and do not rise with the passage of time.

Hence from the above we can conclude that the correct option is D.