Click here to read the eBook: Present Value of an Ordinary Annuity PRESENT VALUE

Question

Click here to read the eBook: Present Value of an Ordinary Annuity PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent. a. $700 per year for 10 years at 496. b. $350 per year for 5 years at 2%. C. $1,000 per year for 6 years at 0%. Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent. d, $700 per year for 10 years at 4%. e, $350 per year for 5 years at 2%. $1,000 per year for 6 years at 0%. e here to search

Explanation / Answer

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

1.Present value=700[1-(1.04)^-10]/0.04

=$700*8.110895779

=$5677.63(Approx)

2.Present value=350[1-(1.02)^-5]/0.02

=$350*4.713459509

=$1649.71(Approx)

Present value of annuity due=Present value of annuity*(1+interest rate)

3.Present value=$1000*6

=$6000

4.Present value= =$5677.63*1.04

=$5904.73(Approx).

5.Present value =$1649.71*1.02

=$1682.71(Approx)

6.Present value=$1000*6

=$6000

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