Suppose you are going to receive $15,000 per year for five years. The appropriate interest rate is 8 percent.
a- What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due?
b- Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are an annuity due?
c- Which has the higher present value, the ordinary annuity or the annuity due? Which has the higher future value? Will this always be true?