Question

Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent.

a. $300 per year for 10 years at 12%.

b. $150 per year for 5 years at 6%.

c. $800 per year for 8 years at 0%.

Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.

d. $300 per year for 10 years at 12%.

e. $150 per year for 5 years at 6%.

f. $800 per year for 8 years at 0%.

Answer 1

Answer 1-a
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	300	300	300	300	300	300	300	300	300	300
ii	PVIF @12%	0.8929	0.7972	0.7118	0.6355	0.5674	0.5066	0.4523	0.4039	0.3606	0.3220
iii=i*ii	PV	268	239	214	191	170	152	136	121	108	97	1695
	Present value		1695
Answer 1-b
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	150	150	150	150	150	150	150	150	150	150
ii	PVIF @6%	0.9434	0.8900	0.8396	0.7921	0.7473	0.7050	0.6651	0.6274	0.5919	0.5584
iii=i*ii	PV	142	133	126	119	112	106	100	94	89	84	1104
	Present value		1104
Answer 1-c
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	800	800	800	800	800	800	800	800	800	800
ii	PVIF @0%	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000
iii=i*ii	PV	800	800	800	800	800	800	800	800	800	800	8000
	Present value		8000
Answer 2-a
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	300	300	300	300	300	300	300	300	300	300
ii	PVIF @12% annuity due	1.0000	0.8929	0.7972	0.7118	0.6355	0.5674	0.5066	0.4523	0.4039	0.3606
iii=i*ii	PV	300	268	239	214	191	170	152	136	121	108	1898
	Present value		1898
Answer 2-b
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	150	150	150	150	150	150	150	150	150	150
ii	PVIF @6% annuity due	1.0000	0.9434	0.8900	0.8396	0.7921	0.7473	0.7050	0.6651	0.6274	0.5919
iii=i*ii	PV	150	142	133	126	119	112	106	100	94	89	1170
	Present value		1170
Answer 2-c
	year	1	2	3	4	5	6	7	8	9	10
i	Annuity	800	800	800	800	800	800	800	800	800	800
ii	PVIF @0% annuity due	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000
iii=i*ii	PV	800	800	800	800	800	800	800	800	800	800	8000
	Present value		8000