An ordinary annuity pays equal payments at the end of each period.

• A. True
• B. False
• C. It pays at the beginning
• D. It is a perpetuity

Answer: (A)

The main idea here is the timing of payments in an annuity. An ordinary annuity is defined by equal payments that occur at the end of each period for a fixed number of periods. The statement that payments are made at the end of each period matches this definition, so it’s true. If payments were made at the beginning of each period, that would describe an annuity due. A perpetuity, by contrast, provides equal payments forever, so it isn’t an ordinary annuity.