What is the present value of a 12-year annuity due that pays $5,000 per year, given a discount rate of 7.5 percent? A) $41,577. B) $38,676. C) $36,577. D) $23,857. I know it’s a simple calculation but are we meant to assume that as it’s an annuity it pays at the start of the year? I’m forgetting all that I learnt at the start… so annoying!
Unless it is stated assume it means the annuity pays at the end of the year. Those that start at the beginning will say so or be called an annuity due.
ans A if it says annuity due that means it’s due at the beginning of the month/year/period
i’m lazy to calculate but yes you have to assume it pays at the beginning of each period…that’s the definition of annuity due. =)
ohhh right. thanks
Right. Answer is A. The answer would be B if payments were at the end of the year.