Chapter 5 Homework (part 1) Question 3 (of 13) 3. ints value You did not receive

Question

Chapter 5 Homework (part 1) Question 3 (of 13) 3. ints value You did not receive full cr Problem 5-7 Calculating Annuity Values [LO 1 For each of the following annuities, calculate the annual cash flow. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g, 32.16.) Interest Rate 4% Cash Flow Future Value Years I 24,050 950,000 760,000 130,000 35 21 12 References eBook & Resources Section: 5.2 Valuing Level Cash Flows: Annuilties and Perpetuities Problem 5-7 Calculating Annuity Values ILO 1] Learning Objective: 05-01 Determine the future and present value of investments with multiple cash flows

Explanation / Answer

Assuming the annuity is ordinary annuity and not annuity due

Future Value of ordinary annuity=C/r*(1-1/(1+r)^n) where C is the cash flow per period, n nis the number of periods and r is the interest rate

So,

C=FV*r/(1-1/(1+r)^n)

1. C=24050*4%/(1-1/1.04^8)=3572.094

2. C=950000*6%/(1-1/1.06^35)=65525.17

3. C=760000*7%/(1-1/1.07^21)=70139.64

4. C=130000*3%/(1-1/1.03^12)=13060.07

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