You are comparing two annuities, which offer monthly payments for ten years. Bot

Question

You are comparing two annuities, which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month while annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuities? Both annuities are of equal value today. Annuity B is an annuity due. Annuity A has a higher future value than annuity B. Annuity B has a higher present value than annuity A. Both annuities have the same future value as of ten years from today.

Explanation / Answer

Annuity A has a higher future value than annuity B

Because it is compounded one more time

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