Economics Time Value Of Money Questions
The main difference between an ordinary annuity and an annuity due lies in the timing of the cash flows.
In an ordinary annuity, the cash flows occur at the end of each period. This means that the first cash flow is received at the end of the first period, the second cash flow is received at the end of the second period, and so on.
On the other hand, in an annuity due, the cash flows occur at the beginning of each period. This means that the first cash flow is received immediately at the beginning of the first period, the second cash flow is received at the beginning of the second period, and so on.
In summary, the key distinction is that in an ordinary annuity, the cash flows occur at the end of each period, while in an annuity due, the cash flows occur at the beginning of each period.