Consider the following case.(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

Amount of annuity

Interest rate

Period (years)

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$21,000

8%

7

a.Calculate the present value of the annuity assuming that it is

(1) An ordinary annuity.

(2) An annuity due.

b.Compare your findings in parts

a(1)

and

a(2).

All else being identical, which type of annuity ordinary or annuity due yields a higher present value? Explain why.

The present value of the ordinary annuity is .... $ round to the nearest cent

The present value of the annuity due is ..........$ round to the nearest cent