Finance Dictionary
Annuity Due
Definition
An annuity whose payment is due immediately at the beginning of each period.
Deep Dive
An annuity due is a series of equal payments made or received at the beginning of each period. This timing distinguishes it from an ordinary annuity, where payments occur at the end of each period. Because each payment in an annuity due is made at the start of the period, it has an additional period to earn interest or be utilized compared to an ordinary annuity, leading to a higher present value and future value for the same stream of payments and interest rate.
Examples & Use Cases
- 1Paying monthly rent on an apartment on the first day of each month
- 2An insurance policy requiring premiums to be paid at the beginning of each policy period
- 3Lease payments for a commercial vehicle or equipment that are due immediately at the start of each month or quarter.
Related Terms
Ordinary AnnuityAnnuityPresent ValueFuture Value