Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year. Group of answer choices True False
Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year. Group of answer choices True False
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year.
Group of answer choices
True
False
Expert Solution
Step 1
The Future Value of the annuity is the total value of all the payments which is occurred regularly at a specific time interval at a certain date in the future taken into consideration a specific discount rate or rate of return. The higher the discount rate or rate of interest, the higher will be the future value of the annuity, and the lower the rate of interest or the discount rate, the lower will be the value of the annuity.
The Future value of annuity due is the total future value of each cash flow which is made at the beginning of every period and carries a specific amount of interest rate. It is used by financial institutions to calculate cash flow associated with their cash flows.
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