Question

In: Finance

1. The present value of an ordinary annuity is determined on the last day of the...

1. The present value of an ordinary annuity is determined

on the last day of the first annuity period.

on the first day of the first annuity period.

on the last day of the last annuity period.

immediately before the first cash flow in the series occurs.

(Click here to access the time value of money tables to use with this problem.)

2. What is the present value (rounded to nearest dollar) of a series of bond interest payments of $2,000 each paid semiannually for 4 years when the annual interest rate is 8%?

$6,624

$11,465

$13,465

$16,000

Future Value of 1: fn,i 5 (1 þ i ) n n 1.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 1 1.015000 1.040000 1.045000 1.050000 1.055000 1.060000 1.070000 2 1.030225 1.081600 1.092025 1.102500 1.113025 1.123600 1.144900 3 1.045678 1.124864 1.141166 1.157625 1.174241 1.191016 1.225043 4 1.061364 1.169859 1.192519 1.215506 1.238825 1.262477 1.310796 5 1.077284 1.216653 1.246182 1.276282 1.306960 1.338226 1.402552 6 1.093443 1.265319 1.302260 1.340096 1.378843 1.418519 1.500730 7 1.109845 1.315932 1.360862 1.407100 1.454679 1.503630 1.605781 8 1.126493 1.368569 1.422101 1.477455 1.534687 1.593848 1.718186 9 1.143390 1.423312 1.486095 1.551328 1.619094 1.689479 1.838459 10 1.160541 1.480244 1.552969 1.628895 1.708144 1.790848 1.967151 11 1.177949 1.539454 1.622853 1.710339 1.802092 1.898299 2.104852 12 1.195618 1.601032 1.695881 1.795856 1.901207 2.012196 2.252192 13 1.213552 1.665074 1.772196 1.885649 2.005774 2.132928 2.409845 14 1.231756 1.731676 1.851945 1.979932 2.116091 2.260904 2.578534 15 1.250232 1.800944 1.935282 2.078928 2.232476 2.396558 2.759032 16 1.268986 1.872981 2.022370 2.182875 2.355263 2.540352 2.952164 17 1.288020 1.947900 2.113377 2.292021 2.484802 2.692773 3.158815 18 1.307341 2.025817 2.208479 2.406619 2.621466 2.854339 3.379932 19 1.326951 2.106849 2.307860 2.526950 2.765647 3.025600 3.616528 20 1.346855 2.191123 2.411714 2.653298 2.917757 3.207135 3.869684 21 1.367058 2.278768 2.520241 2.785963 3.078234 3.399564 4.140562 22 1.387564 2.369919 2.633652 2.925261 3.247537 3.603537 4.430402 23 1.408377 2.464716 2.752166 3.071524 3.426152 3.819750 4.740530 24 1.429503 2.563304 2.876014 3.225100 3.614590 4.048935 5.072367 25 1.450945 2.665836 3.005434 3.386355 3.813392 4.291871 5.427433 26 1.472710 2.772470 3.140679 3.555673 4.023129 4.549383 5.807353 27 1.494800 2.883369 3.282013 3.733456 4.244401 4.822346 6.213868 28 1.517222 2.998703 3.429700 3.920159 4.477843 5.111687 6.648838 29 1.539981 3.118651 3.584036 4.116136 4.724124 5.418388 7.114257 30 1.563080 3.243398 3.745318 4.321942 4.983951 5.743491 7.612255 (continued)

Solutions

Expert Solution

on the first day of the first annuity period.

4.0000%
Cash flows Year Discounted CF
                           -   0 0.00
              2,000.00 1 1923.08
              2,000.00 2 1849.11
              2,000.00 3 1777.99
              2,000.00 4 1709.61
              2,000.00 5 1643.85
              2,000.00 6 1580.63
              2,000.00 7 1519.84
              2,000.00 8 1461.38

Present value = 13,465


Related Solutions

Calculate the present value of the annuity assuming that it is (1) an ordinary annuity (2)...
Calculate the present value of the annuity assuming that it is (1) an ordinary annuity (2) an annuity due. Comparing the two types of annuities, all else equal, which type is more preferable? Why? Amount of annuity=$12,000 Interest rate=7% Deposit period (years)=3 Ordinary annuity = 33696, annuity due = 31492, ordinary annuity is better because it discounts for one less year. Ordinary annuity = 31492, annuity due = 33696, annuity due is better because it discounts for one less year....
The present value of an annuity due is equal to the present value of an ordinary...
The present value of an annuity due is equal to the present value of an ordinary annuity times (1 + i). Select one: True False
1) a. Find the present value of an ordinary annuity if you have a plan to...
1) a. Find the present value of an ordinary annuity if you have a plan to pay an annuity of Rial Omani B at the end of each week for A years. Bank Muscat offers the discount rate of E % compounded weekly. b. Suppose that you have deposited Rial Omani (B × E) in the special account of Bank Nizwa at the end of each semi year for C months. If the special account of Bank Nizwa offers at...
Explain how the present value and future value of an annuity is determined.
Explain how the present value and future value of an annuity is determined. Please give example. At least 250 words. 
eBook Present Value of an Annuity Find the present value of thefollowing ordinary annuities. Do...
Present Value of an Annuity Find the present value of the following ordinary annuities. Do not round intermediate calculations. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown...
1. The present value of an ordinary annuity: a.is equal to the amount of money invested...
1. The present value of an ordinary annuity: a.is equal to the amount of money invested in the future b. represents a lump sum payment c. determines the amount of money that needs to be invested today d.can be determined only using the tables 2. Which of the following statements is correct? a. present value may only be found using a table b.present value concerns both the present, and future values c.present value concerns primarily the future value d.present value...
1. Find the following values assuming a regular, or ordinary, annuity: The present value of $400...
1. Find the following values assuming a regular, or ordinary, annuity: The present value of $400 per year for ten years at 10 percent The future value of $400 per year for ten years at 10 percent The present value of $200 per year for five years at 5 percent The future value of $200 per year for five years at 5 percent
PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once...
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. $700 per year for 16 years at 6%. $   $350 per year for 8 years at 3%. $   $800 per year for 6 years at 0%. $   Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent. $700 per year for 16 years at 6%. $   $350 per year...
PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once...
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. $600 per year for 16 years at 12%. $   $300 per year for 8 years at 6%. $   $900 per year for 16 years at 0%. $   Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent. $600 per year for 16 years at 12%. $   $300 per year...
Why does an annuity due have a higher present value than a similar ordinary annuity?
Why does an annuity due have a higher present value than a similar ordinary annuity?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT