Question

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

$200 per year for 10 years at 10%. $ ___?

$100 per year for 5 years at 5%. $ ___?

$600 per year for 5 years at 0%. $ ___?

Rework previous parts assuming they are annuities due.

Present value of $200 per year for 10 years at 10%: $ ____?

Present value of $100 per year for 5 years at 5%: $ ____?

Present value of $600 per year for 5 years at 0%: $____?

Answer 1

a)

Present Value Annuity =

where r is the rate of Return for compounding period = 10%

n is the no of compounding period 10

=

= 1228.91

b)

Present Value Annuity =

where r is the rate of Return for compounding period = 5%

n is the no of compounding period 5

=

= 432.95

c)

Present Value = 600 * 5 = 3000

d)

part a)

Present Value Annuity =

where r is the rate of Return for compounding period = 10%

n is the no of compounding period 10

=

= 1351.80

b)

Present Value Annuity =

where r is the rate of Return for compounding period = 5%

n is the no of compounding period 5

=

= 454.60

c)

Present Value = 600 * 5 = 3000