Using the appropriate present value table and assuming a 12% annual interest rat

Question

Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2016, of a five-period annual annuity of $5,000 under each of the following situations: (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.) 1. The first payment is received on December 31, 2017, and interest is compounded annually.

Table or calculator function:?

Payment: 5000

n= ?

i=12%

PV-12/31/2016: ?

2. The first payment is received on December 31, 2016, and interest is compounded annually.

Table or calculator function:?

Payment: 5000

n= ?

i=12%

PV-12/31/2016: ?

3. The first payment is received on December 31, 2017, and interest is compounded quarterly.

I got incorrect answers:

Using the PV of $1 chart, calculate the present value:

Deposit Date i= n= Deposit PV_ 12/31/2016

12/31/2017 12% ? 1 ?   5000 4464 ?

12/31/2018 12%? 2? 5000 3986 ?

12/31/2019 12%? 3? 5000 3559 ?

12/31/2020   12%? 4? 5000 3178 ?

12/31/2021 12%? 5?   5000 2837 ?

$ 18,024 ?

Explanation / Answer

(1)

Annual interest rate i 12% Life n 5 Years Annual annuity P 5000 Present value = P*[{1-(1+i)^-n}/i] = 18025 Thus, present value is $ 18,025

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