Question

assume the annuities are annuities due

a.   The present value of $400 per year for ten years at 10 percent

b.   The future value of $400 per year for ten years at 10 percent

c.   The present value of $200 per year for five years at 5 percent

d.   The future value of $200 per year for five years at 5 percent

Answer 1

a.Information provided:

Annuity= $400

Time= 10 years

Interest rate= 10%

Enter the below in a financial calculator to compute the present value:

PMT= 400

N= 10

I/Y= 10

Press the CPT key and PV to calculate the present value.

The value obtained is 2,457.83.

Therefore, the present value is $2,457.83.

b.Information provided:

Annuity= $400

Time= 10 years

Interest rate= 10%

The question is solved by computing the future value.

Enter the below to calculate the future value:

PV= -400

N= 10

I/Y= 10

Press the CPT key and FV to calculate the future value.

The value obtained is 6,374.97.

Therefore, the future value is $6,374.97.

c.Information provided:

Annuity= $200

Time= 5 years

Interest rate= 5%

Enter the below in a financial calculator to compute the present value:

PMT= 200

N= 5

I/Y= 5

Press the CPT key and PV to calculate the present value.

The value obtained is 865.90.

Therefore, the present value is 865.90.

d.Information provided:

Annuity= $200

Time= 5 years

Interest rate= 5%

The question is solved by computing the future value.

Enter the below to calculate the future value:

PMT= 200

N= 5

I/Y= 5

Press the CPT key and FV to calculate the future value.

The value obtained is 1,105.13.

Therefore, the future value is $1,105.13.

In case of any query, kindly comment on the solution.