Suppose you are going to receive $13,600 per year for four years. The appropriat
ID: 2741990 • Letter: S
Question
Suppose you are going to receive $13,600 per year for four years. The appropriate interest rate is 8.5 percent.
a-1 What is the present value of the payments if they are in the form of an ordinary annuity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Present value $ =
a-2 What is the present value if the payments are an annuity due? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Present value $ =
b-1 Suppose you plan to invest the payments for four years. What is the future value if the payments are an ordinary annuity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value $ =
b-2 Suppose you plan to invest the payments for four years. What is the future value if the payments are an annuity due? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value $ =
Explanation / Answer
Answer a-1.
Present value = 13,600/1.085 + 13,600/1.085^2 + 13,600/1.085^3 + 13,600/1.085^4
Present value = $44,548.11
Answer a-2.
Present value = 13,600 + 13,600/1.085 + 13,600/1.085^2 + 13,600/1.085^3
Present value = $48,334.70
Answer b-1.
Future value = 13,600*1.085^3 + 13,600*1.085^2 + 13,600*1.085 + 13,600
Future value = $61,737.39
Answer b-2.
Future value = 13,600*1.085^4 + 13,600*1.085^3 + 13,600*1.085^2 + 13,600*1.085
Future value = $66,985.07
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