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.

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jeff jeffy answered 2 years ago

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