Suppose you are going to receive $13,100 per year for five years. The appropriat

Question

Suppose you are going to receive $13,100 per year for five years. The appropriate interest rate is 8 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 answer to 2 decimal places, e.g., 32.16.)

Suppose you are going to receive $13,100 per year for five years. The appropriate interest rate is 8 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 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 answer to 2 decimal places, e.g., 32.16.) Present value b-1 Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value b-2 Suppose you plan to invest the payments for five years. What is the future value if the payments are an annuity due? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value

Explanation / Answer

a) PMT = 13100
n = 5 years
rate = 8%
a-1)PV of Ordinary annuity = PMT*(1-(1+r)-n)/r = 13100* (1 -(1+8%)-5)/8% = 52304/50

a-2) PV of Annuity due = (1+r)*PMT*(1-(1+r)-n)/r = (1+8%)*13100* (1 -(1+8%)-5)/8% = 56488.86

b-1) Furture Value of annuity = PMT*((1+r)n-1)/r = 13100*((1+8%)5-1)/8% = 76852.47

b-2) Furture Value of annuity due = (1+r)* PMT*((1+r)n-1)/r = (1+8%)*13100*((1+8%)5-1)/8% = 83000.067

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