An investor purchases an annuity that will pay $5,000 per year for 5 years, with the first payment beginning one year from today. This is BEST described as:
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BAn ordinary annuity, because payments occur at the end of each period
CA perpetuity, because payments recur indefinitely
DA deferred annuity due, because the first payment is delayed by one year
✓ Correct answer: B. An ordinary annuity, because payments occur at the end of each periodAn ordinary annuity (also called an annuity in arrears) is defined as a series of equal payments made at the end of each period, consistent with the first payment occurring one year from today.
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