If two annuities are identical in every way except that one is an "ordinary" annuity and the other is an "annuity due", the annuity due will sell at a ____________ price because its cash-flows come __________. Group of answer choices

Respuesta :

Answer:

Higher, sooner

Explanation:

In an annuity due, recurring cashflows occur at the beginning of the period like beginning of every year, beginning of every month, every week etc.They occur sooner and therefore have extra time to earn interest, making this annuity sell at a higher price. On the other hand, recurring cashflows in an Ordinary annuity occur at the end of the period like end of the year, end of every month, every week etc. This annuity will sell at a lower price.