A 7-year annuity of fourteen $12,200 semiannual payments will begin 9 years from
ID: 2740136 • Letter: A
Question
A 7-year annuity of fourteen $12,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 13 percent compounded monthly, what is the value of this annuity five years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the annuity $ If the discount rate is 13 percent compounded monthly, what is the value three years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the annuity $ If the discount rate is 13 percent compounded monthly, what is the current value of the annuity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the annuity $
Explanation / Answer
13% monthly compounding APR can be converted into semi-annual compounding APR as shown below.
= [(1+1.0833%)^6-1]×2
= 13.36%
Value of annuity 9 year from now P×[1-(1÷(1+r)^n)]÷r Here, 1 Interest rate per annum 13.36% 2 Number of years 7 3 Number of compoundings per per annum 2 4 = 1÷3 Interest rate per period ( r) 6.68% 5 = 2×3 Number of periods (n) 14 Payment per period (P) $ 12,200.00 Value of annuity 9 year from now $ 108,772.70 12200*[1-(1/(1+6.68%)^14)]/6.68%Related Questions
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