Question

help?

Part 1: Explain the difference between the present value of a lump sum investment and an annuity.
Part 2: Explain the difference between the present value of an ordinary annuity and an annuity due.
Part 3: Explain which variables would be included when using technology to calculate the present value of a lump sum and to calculate the present value of an annuity.

Answer 1

I can help with 1.

A lump sum is an amount of money paid out in full that represents the current value of an investment. An annuity, are periodic payments made over time that represent the value of an investment over some long-term period.

The lump sum is usually worth less compared to an annuity if the annuity is paid over an indefinite period of time.

Answer 2

Certain Actuarial Valuation Standards refuse to admit that benefit payments constitute an "Annuity" unless they pay at least annually for at least five years.

Answer 3

Ordinary Annuity (Annuity Immedaite) and Annuity Due differ by the interest of one compounding period.

Answer 4

Generally, on a Financial Calculator, you will find these:

[Interest]
[Number of Periods]
[Benefit Amount]
[Present Value]
[Future Value]

You decide.