As discussed in the text, an annuity due is identical to an ordinary annuity except that the
Question:
As discussed in the text, an annuity due is identical to an ordinary annuity except that the periodic payments occur at the beginning of each period instead of at the end of the period. Show that the relationship between the value of an ordinary annuity and the value of an otherwise equivalent annuity due is:
Annuity due value = Ordinary annuity value × (1 + r)
Show this for both present and future values.
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
he present value of an annuity is the current value of future payments from an annuity, given a specified rate of return, or discount rate. The higher the discount rate, the lower the present value of the annuity
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