5-5A (Compound Annuity) What is the accumulated sum of each of the following str

Question

5-5A
(Compound Annuity) What is the accumulated sum of each of the following stream of payment?
b. $100 a year for 5 years compounded annually at 10 percent.
c. $35 a year for 7 years compounded annually at 7 percent.
d. $25 a year for 3 years compounded annually at 2 percent.

5-6A
(Present Value of an annuity) What is the present value of the following annuity?
b. $70 a year for 3 years discounted back to the present at 3 percent.
c. $280 a year for 7 years discounted back to the present at 6 percent.
d. $500 a year for 10 years discounted back to the present at 10 percent

Explanation / Answer

The future value of annuity is calculated as: b) Step1: Go to excel and click “insert” to insert the function Step2: Select the “FV” function as we are finding the future value of annuity in this case Step3: Enter the values as Rate = 10%; Nper = 5; PMT = -100; PV = 0 Step4: The value comes to “$610.51” c) Step1: Go to excel and click “insert” to insert the function Step2: Select the “FV” function as we are finding the future value of annuity in this case Step3: Enter the values as Rate = 7%; Nper = 7; PMT = -35; PV = 0 Step4: The value comes to “$302.89” Therefore the future value is $302.89 d) Step1: Go to excel and click “insert” to insert the function Step2: Select the “FV” function as we are finding the future value of annuity in this case Step3: Enter the values as Rate = 2%; Nper = 3; PMT = -25; PV = 0 Step4: The value comes to “$76.51” Therefore the future value is $76.51 The present value of annuity is calculated as: b) Step1: Go to excel and click “insert” to insert the function Step2: Select the “PV” function as we are finding the Present value in this case Step3: Enter the values as Rate = 3%; Nper = 3; PMT = -70; FV = 0 Step4: The value comes to “$198” Therefore the present value is $198 c) Step1: Go to excel and click “insert” to insert the function Step2: Select the “PV” function as we are finding the Present value in this case Step3: Enter the values as Rate = 6%; Nper = 7; PMT = -280; FV = 0 Step4: The value comes to “$1,563” Therefore the present value is $1,563 d) b) Step1: Go to excel and click “insert” to insert the function Step2: Select the “PV” function as we are finding the Present value in this case Step3: Enter the values as Rate = 10%; Nper = 10; PMT = -500; FV = 0 Step4: The value comes to “$3072.28” Therefore the present value is $3072.28

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