24.5.1 - Types of Annuities
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Practice Questions
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Define an ordinary annuity.
💡 Hint: Consider the timing of payment in this type of annuity.
What is the main difference between an annuity due and an ordinary annuity?
💡 Hint: Think about when payments occur for each type.
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Interactive Quizzes
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What is an ordinary annuity?
💡 Hint: Think about when these payments occur.
Is the following statement true or false? 'An annuity due provides less total interest earned compared to an ordinary annuity.'
💡 Hint: Consider when payments are made.
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Challenge Problems
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You have invested in an ordinary annuity that pays ₹15,000 per year for 10 years at an interest rate of 6%. Calculate the future value at the end of 10 years.
💡 Hint: Make sure to apply the FV formula for the ordinary annuity correctly.
Calculate the present value of an annuity due that pays ₹8,000 per year for 5 years with a discount rate of 5%.
💡 Hint: Remember, you need to factor in the '1 + r' for annuity due.
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