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    Calculations for an ordinary annuity vs an annuity due

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    CASE AMOUNT OF ANNUITY INTEREST RATE DEPOSIT PERIOD (YR)

    A $2,500 8% 10YRS

    B 500 12 6

    C 30,000 20 5

    D 11,500 9 8

    E 6,000 14 30

    a. CALCULATE THE FUTURE VALUE OF THE ANNUITY ASSUMING THAT IT IS

    1. An ordinary annuity
    2. An annuity due
    b. Compare your findings in a(1) and a (2). All else identical, which type of annuity - ordinary or annuity due - is preferable? Please explain why.

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    Solution Preview

    Future value of annuity-

    CASE AMOUNT OF ANNUITY INTEREST RATE DEPOSIT PERIOD (YR)

    A $2,500 8% 10YRS

    B 500 12 6

    C 30,000 20 ...

    Solution Summary

    Calculations for an ordinary annuity vs an annuity due

    $2.19

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