Which of the following is not true regarding an annuity due?<\/p>\n\n\n\n
Select the correct response:<\/p>\n\n\n\n
It is a series of equal cash flows.
Payments are made at the start of each period.
It is also known as deferred annuity.
Cash flows occur for a specific time.<\/p>\n\n\n\n
The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n Correct Answer:<\/strong> An annuity due<\/strong> is a type of annuity where payments are made at the beginning of each period<\/strong> rather than at the end. This timing difference is what primarily distinguishes an annuity due from an ordinary annuity<\/strong>, where payments are made at the end<\/strong> of each period.<\/p>\n\n\n\n Let’s evaluate each of the options to identify the incorrect statement:<\/p>\n\n\n\n An annuity due is not<\/strong> the same as a deferred annuity<\/strong>. While both involve scheduled cash flows, their timing and purpose differ. An annuity due is for immediate use<\/strong>, while a deferred annuity is structured to start later, often used for retirement planning. Recognizing this difference is important for accurately understanding financial products and their applications.<\/p>\n","protected":false},"excerpt":{"rendered":" Which of the following is not true regarding an annuity due? Select the correct response: It is a series of equal cash flows.Payments are made at the start of each period.It is also known as deferred annuity.Cash flows occur for a specific time. The correct answer and explanation is : Correct Answer:It is also known […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-210939","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210939","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=210939"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210939\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=210939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=210939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=210939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
It is also known as deferred annuity.<\/strong><\/p>\n\n\n\nExplanation:<\/h3>\n\n\n\n
\n
\u2705 True.<\/strong> An annuity due involves equal payments made at regular intervals, just like any standard annuity.<\/li>\n\n\n\n
\u2705 True.<\/strong> This is the defining characteristic of an annuity due. For example, rent payments are typically made at the beginning of the month, making rent an example of an annuity due.<\/li>\n\n\n\n
\u274c Not true.<\/strong> This is incorrect<\/strong> because a deferred annuity<\/strong> refers to an annuity where payments begin at a future date after a deferral period. In contrast, an annuity due starts payments immediately<\/strong> (at the beginning of each period). Therefore, they are distinctly different types of annuities and should not be confused with one another.<\/li>\n\n\n\n
\u2705 True.<\/strong> Both annuity due and ordinary annuities have payments that occur for a defined period (e.g., monthly for five years). This distinguishes them from perpetuities, which last forever.<\/li>\n<\/ol>\n\n\n\nSummary:<\/h3>\n\n\n\n