- CFA Exams
- Forums
- General Forum
- Topic: How to know when it is
| Author | Topic: How to know when it is |
|---|---|
| Upretyt @2015-08-22 12:17:22 |
Here's a simple question I came across: If $1000 is invested today at the beginning of each of the next three years at 12% interest rate (compounded annually), the amount an investor will have at the end of the fourth year will be closes to: 1) $4,779 2) %5,353 3) $6,792 The solution says this is a annuity due! What is a way to distinguish between ordinary annuity and annuity due for this or any other problem? I appreciate your help:) |
| Abuchiere @2015-10-09 15:15:07 |
Due - the payments begin NOW. It helps me to think of due as the "due date" = today. They key words in this question are "today at the beginning" Ordinary - the payments are paid sometime in the future like the end of the month/year/period. If it were ordinary it would say something like "If $1000 is invested at the end of each month" |
