Why does annuity due earn more than ordinary annuity?

In an ordinary annuity, the payments go into the investment at the end of the payment period. In an annuity due, the payments are made upfront. For that reason annuity due earns extra interest in the duration of the initial period.

How can future value of an annuity be determined?

Read this great article on calculating the future value of annuities from Investopedia.

When is time value of money used?

Time value of money is taken into consideration every time a long or medium-term financial decision is to be made.

How can time value of money help financial managers?

Financial players, institution and individuals alike, have limited funds. The understanding of how value of money varies over time can help managers make optimal financial decisions that aim at retaining or increasing their purchasing power.

When is time value of money irrelevant?

The idea that money value changes over time is a fundamental principle of finance. Time value of money, while often ignored, is never irrelevant as time is an inherent factor of investing. The actual purchasing power depends on many factors, such as inflation or deflation of money, scarcity of resources, civilizational development and many more. All these variables change dynamically over time and greatly influence the purchasing power.

What is Time Value of Money in Finance?

Time Value of Money is the understanding that purchasing power of money changes as time goes by, typically by decreasing.