Annuities are a constant stream of payments. Some examples of an annuity is receiving rent payment from tenants or interest from borrowers for a constant period. An annuity due is specifically when that payment is received in advance for the service. Out of the two examples of an annuity, the best example of an annuity due is receiving rent in advance.
Example:
Adequate Disclosure, Inc. enters into a 10 year lease agreement with Inadequate Disclosure, Inc. with an interest rate of 10% requiring annual payments of $100,000 at the beginning of each year on January 1st. The present value factor 10% of 10 years is 6.759. What is the present value of the lease?
$100,000 x 6.759 = $675,900