please show ur work/give an explanation. thank u 1s) whut happers to the PV of a

Question

please show ur work/give an explanation. thank u

1s) whut happers to the PV of a set amoust f the lengs of tive urwas from 30 o 7 years, but the b) The PV decreases ) The PV doesn 't change d) The PV goes to infisity You can invest fauls al 8%annally). You are coneidering buying an aanaity and are comparing two alternatives? Both of these are 1U years in length, with the sane number of monthly payments (to you) of $6,000. The fies instrument pays al the "end" of the month while the second pays al the "beginming of the monds. You believe that the second alternative must be worth more as the money comes to you faster, bat how mach more is n worth to you? a) $40 b) $480 16) c) $2,812 d) $3,297 e) $6,000 14) What happens to the PV of a set amount to be received im 10 years it yout rate of return incresws? a) The PV increases b) The PV decreases c) The PV doesn't change d) The PV coes to infinity

Explanation / Answer

c) $3,297 Now difference between 1 st and 2nd annuity is the first and last instalment i.e. 1st to 119 instalments of first annuity and 2nd to 120 instalment of second annuity wll be received at the same time. so difference in 2 annuities would be difference between present value of 120th instalment of first annuity and pv of first instalment of second annuity PVF at end of 120 Instalment                                    0.4505 Annuity Instalment Value                                 6,000.00 PV of Installment(6000*.4505)                                 2,703.00 PV of first instalment of second annuity                                 6,000.00 Difference                                 3,297.00

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