Which type of annuity has payments that occur at the beginning of the period?

Question

BlackTom AI · Accepted Answer

This question asks which type of annuity features payments at the beginning of each period.
Option 1: 'Ordinary annuity' — In an ordinary (or normal) annuity, payments occur at the end of each period, not the beginning, so this description does not match.
Option 2: 'Annuity due' — This exactly matches the definition: payments are made at the start of each period, which is the key distinguishing feature from an ordinary annuity.
Option 3: 'Perpetuity' — A perpetuity involves infinite payments, typically with payments continuing forever, but it does not specify timing at the beginning of periods and is not defined by the payment point; thus it is not the correct characterization for the timing question.
Option 4: 'Celestial annuity' — This term is not used in standard financial mathematics and appears to be a nonstandard or humorous option; it does not describe a real type of annuity.
In summary, only the description in Option 2 aligns with payments at the beginning of each period, while the others describe different concepts or are invalid terms.

MSB-250-300-002 Proctored Midcourse Exam 1

Which type of annuity has payments that occur at the beginning of the period?

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