Click here to read the eBook Present Value of an Ordinary An

Click here to read the eBook: Present Value of an Ordinary Annuity PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent. $800 per year for 12 years at 12%. $ $400 per year for 6 years at 6%. $ $600 per year for 6 years at 0%. $ Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent. $800 per year for 12 years at 12%. $ $400 per year for 6 years at 6%. $ $600 per year for 6 years at 0%. $

Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

a.Present value=$800[1-(1.12)^-12]/0.12

=$800*6.194374225

=$4955.50(Approx).

b.
Present value=$400[1-(1.06)^-6]/0.06

=$400*4.917324326

=$1966.93(Approx)

c.Present value=(600*6)=$3600

Present value of annuity due=Present value of annuity*(1+interest rate)

d.Present value

=$4955.50*1.12

=$5550.16(Approx).

e.
Present value=1966.93*1.06

=$2084.95(Approx)

f.Present value=(600*6)=$3600.