Annuities Due

Time Value Of Money
Annuities Due

Annuity Due Definition: annuity due is like to an ordinary annuity in that it is an even cash flow that occurs ever fixed intervals for a specific period of time however ,unlike ordinary annuities, annuity payments due occur at the beginning of each period, which means that annuities due are compounded for one extra time period than ordinary annuities. examples of annuity payments

To better understand the concept of annuities due, you should construct a time line specific to the annuity you are analyzing.

When calculating the time value of money for annuities due, buying annuities ,you can follow the same equation as single cash flows ,but you must calculate each payment individually. also remember that you should compound interest on the cash flows one time more than ordinary annuities.