When calculating the present value of an annuity, what is the reason someone would prefer to receive payments sooner?

Receiving payments sooner in the context of an annuity provides a better opportunity for interest accumulation. This is fundamentally tied to the time value of money, which states that cash received today is worth more than the same amount received in the future due to its potential earning capacity.

When payments are received earlier, they can be invested or saved, allowing them to generate returns or interest over time. This compounding effect means that the sooner someone receives their payments, the more they can benefit from interest accumulation on the total amount left to invest or use. Therefore, an earlier cash inflow leads to greater financial growth potential over the long run.

In contrast, receiving payments later reduces the time available for investment growth, which can significantly impact the overall value of the payments received. This highlights why those payments should ideally be received sooner rather than later to maximize financial outcomes.