PRC-2 · Chapter 5 · Question 26 of 50
In financial mathematics, how does an 'Annuity Due' differ fundamentally from an 'Ordinary Annuity'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) In an annuity due, payments are strictly made at the beginning of each period rather than at the end.
Explanation
The timing of the cash flows defines the annuity type. Ordinary annuities assume payments occur in arrears (at the end of the period), while annuities due assume payments occur in advance (at the start of the period).
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