(b) The requirement is the situation which illustrates an
annuity due. An annuity due (annuity in advance) is a series of
payments where the first payment is made at the beginning of the
first period, in contrast to an ordinary annuity (annuity in arrears),
in which the first payment is made at the end of the first
period. Answer (b) is correct because the initial lease payment is
due immediately (at the beginning of the first period). Answers
(a), (c), and (d) all illustrate situations in which the first
lease or interest payment occurs at the end of the first period.
Note that in answers (c) and (d), the stated rate and yield rate of
the bonds differ; while this would affect the present value of the
bonds, it has no effect on the classification as an annuity due or
an ordinary annuity.