Amount of annuity 7,000
Interest rate 7%
Deposit period (years) 7
a. Calculate the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity
—ordinary or annuity due—is preferable as an investment? Explain why.