Suppose you are going to receive $10,500 per year for five years. The appropriat
ID: 2646119 • Letter: S
Question
Suppose you are going to receive $10,500 per year for five years. The appropriate interest rate is 8 percent.
What is the present value of the payments if they are in the form of an ordinary annuity? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the present value of the payments if the payments are an annuity due? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
What is the future value if the payments are an annuity due? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Which has the higher present value, the ordinary annuity or annuity due?
Requirement 1: a)What is the present value of the payments if they are in the form of an ordinary annuity? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Explanation / Answer
Present Value Annuity Due = 45277.33
2: a) Future Value Annuity = 10500*((1+0.08)^5-1)/0.08
Future Value Annuity = 61599.31
2: b) Future Value Annuity Due =10500*(1+0.08)*((1+0.08)^5-1)/0.08
Future Value Annuity Due = 66527.254
Answer : Annuity Due
Ans - Annuity Due
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