Ordinary Annuity vs Annuity Due

This video explains the difference between an ordinary annuity and an annuity due.

Both an ordinary annuity and an annuity due are a stream of cash flows; the difference is in the timing of those cash flows. With an annuity due, the first cash flow occurs today. With an ordinary annuity, the first cash flow occurs one period from now.

Thus, the cash flows for an annuity due will begin one period sooner (and will end one period sooner) than the cash flows for an ordinary annuity.

Regarding the formulas, the value of an annuity due is simply the value of the ordinary annuity multiplied by one plus the discount rate.—
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[montasifrashid]

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[thomasnguyen]

Thank you so much! I'm glad you are still active and producing AMAZING content !!!

[HardenTheGift]

The work during grad school goes by so quickly that really understanding this stuff just doensn't happen. This video was very well done. Thank you!

[EpicSB]

Got my exams tomorrow this really helped

[noortariq]

it deserves more nd more likes cz I watched it for 1 minute and 10 sec and my whole concept Is clear

[owie]

Can you please answer now my work is due later where did the 1.07 come from?

[buffmanjr]

Your video helped me understand this concept better. Thanks!

[timtom]

I had a professor build a formula sheet but he did not put the negative before the n. I have spent 4 hours trying to figure out what i was doing wrong.

[jeffyswift]

I'm so glad I found this. Thank youuu

[natariee]

the example at last cleared my question, thanks sir.

[gauravbhayana]

wouldn't it be easier if in the formula only we use 2 years to calculate pv of annuity due and add initial payment (because one payment as you said is being made at present only )

This would make formula seem more logical and easy understanding

[rahid]

Great video, finally understood Annuity due!

[jerrynwee]

hello! came across this just as i was struggling with understanding this concept and it was really helpful thank you :) However, can I ask why we multiply PVOA by (1+r) to get PVAD? I understand that the PV would be higher if you start paying a year earlier, but is there a particular reason why it's (1+r)? Appreciate your help, thank you so much!

[barronbarron]

Do you have one to compare examples of present value vs future value?

[scollection]

Pls do one video on future value of annuity vs future value of annuity due

[hemanb]

Hi i was watching this video and got a question from my tutorial which i think should use the annuity due equation...
"You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 22nd birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to make sure that you will have $2 million in the account on your 65th birthday?"
but the answer is using the ordinary annuity equation... not so sure why is it the case, , , can anyone help on this?

[edimadigabi]

I hate math, even the terminology makes my skin crawl... like the word "point" this word literally makes me want to destroy something