________ is the amount of a $3,000.00 annuity due at 12 percent compounded semiannually for 3 years.

Question

A. $334,321.00
B. $43,068.93
C. $22,180.50
D. $41,814.50

Answer 1

Annuity "due" implies that the payment is made at the end of the interest period instead of the usual end of the period.

so , assuming there are 6 payments of $3000, each made at the beginning of the period. (the wording of the question could be improved)

Amount = 3000( 1.06^6 - 1)/.06 * 1.06 = 22,181.51

Lay out a time-graph to understand why I am multiplying by the extra 1.06
(I don't understand why their answer is off by a whole dollar, none of the
other three answers come remotely close to make any sense)

Answer 2

Thank you! I was very confused.