Question

For each of the following situations involving annuities, solve for the unknown. Assume that interest is compounded annually and that all annuity amounts are received at the end of each period. (i = interest rate, and n = number of years) (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) (Round your final answers to nearest whole dollar amount.)

	Present Value Annuity Amount i = n = 1. $4,000 8% 5 2. 368,041 105,000 4 3. 714,457 110,000 10% 4. 600,000 96,048 9 5. 200,000 10% 4

	Present Value Annuity Amount i = n = 1. $4,000 8% 5 2. 368,041 105,000 4 3. 714,457 110,000 10% 4. 600,000 96,048 9 5. 200,000 10% 4

	Present Value Annuity Amount i = n = 1. $4,000 8% 5 2. 368,041 105,000 4 3. 714,457 110,000 10% 4. 600,000 96,048 9 5. 200,000 10% 4

Answer 1

1.

PV = P x PVAF (i %, n)

PV = P x PVAF (8 %, 5)

     = $ 4,000 x 3.9927

     = $ 15,970.80

2.

PV = P x PVAF (i, n)

$ 368,041 = $ 105,000 x PVAF (i, 4 yr)

PVAF (i, 4 yr) = $ 368,041/$ 105,000

PVAF (i, 4 yr) = 3.505152381

Look the annuity table 4 years row, 3.50515 matches with i value of 5.5%

PVAF (5.5%, 4 yr) = 3.50515

i = 5.5 %

3.

PV = P x PVAF (i, n)

$ 714,457 = $ 110,000 x PVAF (10 %, n)

PVAF (10 %, n) = $ 714,457/$ 110,000

PVAF (10 %, n) = 6.495063636

Look the annuity table 10 % row, 6.49506 matches with n value of 11 years

PVAF (10 %, 11 years) = 6.495063636

n = 11 years

4.

PV = P x PVAF (i, n)

$ 600,000 = $ 96,048 x PVAF (i, 9 yr)

PVAF (i, 9 yr) = $ 600,000 /$ 96,048

PVAF (i, 9 yr) = 6.246876562

Look the annuity table 9 years row, 6.246876 matches with i value of 8 % 6.2469

PVAF (8 %, 9 yr) = 6.2469

i = 8 %

5.

PV = P x PVAF (i %, n)

$ 200,000 = P x PVAF (10 %, 4)

$ 200,000 = P x 3.16987

P = $ 200,000/3.16987

P = $ 63,094.07