easy · Principles of Finance time-value-of-money
What is the primary difference between an 'Ordinary Annuity' and an 'Annuity Due'?
- Payments grow at a constant rate in an annuity due, but stay fixed in an ordinary annuity.
- Ordinary annuities are said to continue on forever, while annuities due have a finite life.
- Payments occur at the end of each period for an ordinary annuity and the beginning for an annuity due.
- Ordinary annuities are traditionally used for structuring loans, while annuities due are used for savings plans.
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