Multiple Choice
Which of the following will increase the present value of an annuity, assuming all other factors remain constant?
16
views
10. Time Value of Money
Time Value of Money Equations
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which one of the following best describes an ordinary annuity?
A
A single lump-sum payment made at the end of the investment period.
B
A series of equal payments made at the end of each period.
C
A series of equal payments made at the beginning of each period.
D
A series of unequal payments made at irregular intervals.
Verified step by step guidance1
Understand the concept of an ordinary annuity: An ordinary annuity refers to a series of equal payments made at the end of each period over a specified time frame.
Compare the characteristics of an ordinary annuity with the options provided in the problem. For example, an ordinary annuity does not involve a single lump-sum payment or unequal payments made at irregular intervals.
Focus on the timing of payments. Payments in an ordinary annuity occur at the end of each period, which distinguishes it from an annuity due, where payments are made at the beginning of each period.
Eliminate incorrect options based on the definition of an ordinary annuity. For instance, the option describing payments made at the beginning of each period refers to an annuity due, not an ordinary annuity.
Select the correct answer: 'A series of equal payments made at the end of each period,' as this aligns with the definition of an ordinary annuity.
5:55mWatch next
Master Time Value of Money and Using Timelines with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Time Value of Money Equations practice set
Problem sets built by lead tutorsExpert video explanations