# Why is annuity due higher than ordinary annuity?

**annuity due than**with an

**ordinary annuity**, an

**annuity due**typically has a

**higher**present value

**than**an

**ordinary annuity**. When interest rates go up, the value of an

**ordinary annuity**goes down. On the other hand, when interest rates fall, the value of an

**ordinary annuity**goes up.

Consequently, what is the difference between annuity and ordinary annuity?

An **annuity** is a series of payments at a regular interval, such as weekly, monthly or yearly. 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.

Similarly, what is an annuity due? An **annuity due** is a repeating payment that is made at the beginning of each period, such as a rent payment. It has the following characteristics: All payments are in the same amount (such as a series of payments of $500). All payments are made at the same intervals of time (such as once a month or year).

Keeping this in view, how do you calculate annuity due from ordinary annuity?

An **annuity due** is **calculated** in reference to an **ordinary annuity**. In other words, to **calculate** either the present value (PV) or future value (FV) of an **annuity**-**due**, we simply **calculate** the value of the comparable **ordinary annuity** and multiply the result by a factor of (1 + i) as shown below

How does the present value of an annuity compare to the present value of an annuity due?

In ordinary **annuities**, payments **are** made at the end of each time period. With **annuities due**, they're made at the beginning. The future **value of an annuity** is the total **value** of payments at a specific point in time. The **present value** is how much money **would** be required now to produce those future payments.