Zenith Insurance is offering a deferred annuity that promises to pay 10% per annum with equal annual payments beginning at the end of 10 years and continuing for a total of 10 annual payments. For an initial investment of $100,000, what will be the amount of the annual payments?
Where does it say it is an annunity due, that pays at the beginning of each period?
“Beginnining at the end of 10 years” to me is starting from year 10, annual payments will be at end of each period.
Another question, At the end of the 10-year deferral period, the value will be: $100,000 × (1 + 0.10)10 = $259,374.25.
Is $259,374.25 the value at end of year 10?
Whether it’s an ordinary annuity or an annuity due depends entirely on what you choose to call time zero. If you call ten years from today time zero, then it’s an annuity due; if you call nine years from today time zero, then it’s an ordinary annuity.
The name doesn’t matter; what matters is when the payments are made vis-à-vis today. Your best strategy, in my humble opinion, is to draw a time line.