Understanding Annuity Due: Payments at the Start of a Period

An annuity due is when an annuity payment must be made at the beginning of a period of time, instead of at the end of the term. With this arrangement, the individual that is making the payment will essentially be paying for something before they actually receive any benefits from it. This is very common with rental and lease agreements. For example, when a business leases a piece of property for a store, they have to pay the landlord for the first month's rent at the beginning of the month instead of at the end.