a-1. Calculate the present value of an annual payment of $1,200 you would receiv

Question

a-1. Calculate the present value of an annual payment of $1,200 you would received for 12 years if the interest rate is 3%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ a-2. Calculate the present value of an annual payment of $1,000 you would received for 17 years if the interest rate is 3%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ a-3. Which option would you prefer? $1,000 a year for 17 years $1,200 a year for 12 years b-1. Calculate the present value of an annual payment of $1,200 you would received for 12 years if the interest rate is 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b-2. Calculate the present value of an annual payment of $1,000 you would received for 17 years if the interest rate is 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b-3. Which option would you prefer? $1,200 a year for 12 years $1,000 a year for 17 years rev: 01_28_2012 check my workreferencesebook & resources eBook: Annuities DueeBook: Level Cash Flows: Perpetuities and AnnuitieseBook: Multiple Cash Flows Worksheet Difficulty: Basic Learning Objective: 05-03 Calculate present and future values of a series of cash payments.

Explanation / Answer

a)
NPV =C[1-(1+r)-n]/r

NPV =1200[1-(1+0.03)-12]/0.03

NPV=$11,944.80

b)

NPV=1000[1-(1+0.03)-17]/0.03

NPV=$13,166.12

c)$1000 for 17 years

d)

NPV=1200[1-1.12-12]/0.12

NPV =$7,433.25

e)

NPV =1000[1-1.12-17]/0.12

NPV=7,119.63
f)$1,000 a year for 17 years

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