Why is Problem 5 (Chapter 7-Basic Finance) computed using FVAD? If the payments are made at...

Why is Problem 5 (Chapter 7-Basic Finance) computed using FVAD? If the payments are made at the end of the year, isn't this an ordinary annuity?

Expert Solution

I can not answer the full part since problem 5 is not attached but I can help you understand what an ordinary annuity is.

An ordinary annuity is a series of equal payments made at the end of consecutive periods over a fixed length of time. While the payments in an annuity can be made as frequently as every week, in practice, ordinary annuity payments are made monthly, quarterly, semi-annually or annually. The opposite of an ordinary annuity is an annuity due, which is when payments are made at the beginning of each period.

whereas an ordinary annuity is a series of equal payments made at the end of consecutive periods over a fixed length of time. While the payments in an annuity can be made as frequently as every week, in practice, ordinary annuity payments are made monthly, quarterly, semi-annually or annually. The opposite of an ordinary annuity is an annuity due, which is when payments are made at the beginning of each period.

all the best

jeff jeffy answered 1 year ago

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