C&H; Ski Club recently borrowed money and agreed to pay it back with a series of

Question

C&H; Ski Club recently borrowed money and agreed to pay it back with a series of six annual payments of $5,000 each. C&H; subsequently borrows more money and agrees t pay it back with a series of four annual payments of $7,500 each. The annual interest rat for both loans is 6%. Find the present value of these two separate annuities. (PV of $1. of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided Round your answers to nearest whole dollar. Round "Table Factor" to 4 decimals.) irst Annui Number of Periods Rate Interest Single Future Amount Borrowed Payment x Table Factor 6%, 8% 6% 8% 6% 8% 5,000 x 5,000 x 5,000 x 5,000 x 5,000 x 5,000 x $ First payment Second payment Third payment Fourth payment Fifth payment Sixth payment 4 Second Annuit Number Interest Single Future of Periods Rate Amount Borrowed x Table Factor Payment $ First payment Second payment Third payment Fourth payment 6%, 8% 6% 8% 7,500 x 7,500 x 7,500 x 7,500 x 4

Explanation / Answer

First Annuity Number of periods Interest rate Single future Payment X Table factor = Amount Borrowed First payment 1 6% 5000 X 0.9434 = 4717.00 Second Payment 2 6% 5000 X 0.8900 = 4450.00 Third Payment 3 6% 5000 X 0.8396 = 4198.00 Fourth Payment 4 6% 5000 X 0.7921 = 3960.50 Fifth Payment 5 6% 5000 X 0.7473 = 3736.50 Sixth Payment 6 6% 5000 X 0.7050 = 3525.00 24587 Second Annuity Number of periods Interest rate Single future Payment X Table factor = Amount Borrowed First payment 1 6% 7500 X 0.9434 = 7075.50 Second Payment 2 6% 7500 X 0.8900 = 6675.00 Third Payment 3 6% 7500 X 0.8396 = 6297.00 Fourth Payment 4 6% 7500 X 0.7921 = 5940.75 25988

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