What is the difference between an ordinary annuity and an annuity due? What value can be used to quickly convert both the present value and the future value of an ordinary annuity leyte annuity due values?

Difference

An annuity is a series of payments at a regular interval, such as weekly, monthly or yearly. Fixed annuities pay the same amount in each period, whereas the amounts can change in variable annuities. The payments in an ordinary annuity occur at the end of each period. In contrast, an annuity due features payments occurring at the beginning of each period.

The difference between an ordinary annuity and annuity due lies in when the payments occur – at the period's end for an ordinary annuity and at the period's beginning for an annuity due.

FUTURE VALUE OF ORDINARY ANNUITY

FV = A x((1+i)ⁿ- 1 / i

FUTURE VALUE OF ANNUITY DUE

FV = (A x((1+i)ⁿ- 1 / i ) x (1+i)

adding 1+i to the ordinary annuity will become annuity due

similarly

PRESENT VALUE OF ORDINARY ANNUITY

P = A (1/i - 1/i(1+i)ⁿ)

PRESENT VALUE OF ANNUITY DUE

P = A (1/i - 1/i(1+i)ⁿ) x (1+i)

adding 1+i to the ordinary annuity will become annuity due