Time Value of Money - Chapter 4

Question 1

What is the difference between an ordinary annuity and an annuity due?

Answer 1

Since each payment of an annuity due is received one period sooner, each is compounded for one year longer than for an ordinary annuity

Question 2

Loan Amortization

Answer 2

The determination of the equal annual (periodic) loan payments necessary to provide a lender with a specified interest return and repay the loan principal over a specified period.