Which type of annuity has payments made at the end of each time period?

The correct answer, which refers to an ordinary annuity, is characterized by payments made at the end of each time period. This type of annuity is commonly used in financial calculations where cash flows, such as monthly or yearly payments, occur at the conclusion of each interval. For example, if you invest in an ordinary annuity and schedule monthly payments, those payments will be disbursed at the end of each month, thus affecting the time value of money calculations.

In contrast, an annuity due involves payments made at the beginning of each period, which results in slightly higher present value and future value calculations due to interest being applied for a longer duration compared to an ordinary annuity. Deferred annuities, on the other hand, start their payment phase only after a specific period, and immediate annuities begin payments right away, often at the start of the investment period.

Understanding these nuances is crucial for financial planning and investment decision-making, as different types of annuities suit varied financial needs and timelines.