P5-20 Present value of an annuity Consider the following cases. Case Annuity payment $ 12,000 $5,000 700 140,000 22,500 ARC DE B Interest rate 7% 12 20 S 10 Annuity length (years) 3 15 9 7 S 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-is preferable? Explain why.

P5-20 Present value of an annuity Consider the following cases. 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 - is preferable? Explain why