a. Calculate the present value of the annuity assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable? Explain why.

a. Calculate the present value of the annuity assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable? Explain why.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate the future value of the following annuities, assuming each annuity payment is made at the end of each compounding period. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) 1. 2. 3. Annuity Annual Payment Rate $4,700 6.0 % 8.0 % 7,700 6,700 10.0 % Show Transcribed Text 1. 2. 3. Annuity Annual Payment Rate Interest Compounded Quarterly Annually Semiannually $ 5,700 Interest Compounded 8.0 % Quarterly 10,700 11.0% Annually 4,700 10.0 % Semiannually Period Invested 5 years 6 years 9 years Calculate the present value of the following annuities, assuming each annuity payment is made at the end of each compounding period. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) $ Period Invested 2 years 5 years 3 years Future Value of Annuity 172,892.28 Present Value of Annuity
5. Future Value of an Annuity The table below contains information on four different annuities. a) Calculate the future value of each annuity if it is i) An ordinary annuity ii) An annuity due b) Compare your findings. All else being identical, which type of annuity-ordinary annuity or annuity due—is preferable? Why? Part Annual CF Interest Rate Deposit Period (Years) A $1,000 B $1,200 C $6,000 D $20,000 3% 6% 8% 12% 5825 12 15
2. Consider the data in the following table: Perpetuity Annual amount discount rateA 100,000 10B 3,000 6 Determine the present value of each perpetuity.
kk.
Calculate the future value of the following annuities, assuming each annuity payment is made at the end of each compounding period. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) Annuity Payment Annual Rate Interest Compounded Period Invested Future Value of Annuity 1. $3,100 8.0 % Semiannually 9 years $79,500.77 2. 6,100 10.0 % Quarterly 5 years 3. 5,100 12.0 % Annually 6 years
Question 3 (25 points): If the present value of a perpetuity is given by: where C is the periodic payments and r is the discount rate. Show that the present value of an annuity of n years is given by: 1 C - (1 + r)]
8.
posit at the end of hat year 3? p5-19 Future value of an annuity For each case in the accompanying table, answer the questions that follow. Case Amount of annuity Interest rate Deposit period (years) A. $ 2,500 8% 10 S00 12 30,000 20 D. 11,500 8. E 6,000 30 a. Calculate the future value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. h Compare your findings in parts a(1) and a(2). All else being identical, which type able? Explain why.
G34-18 Future value of an annuity For each case in the accompanying table, answer the questions that follow. Case A B C D E Amount of Interest annuity rate $ 2,500 500 30,000 11,500 6,000 8% 12 20 9 14 Deposit period (years) 10 6 5 8 30 a. Calculate the future value of the annuity assuming that it is (1) an ordinary annuity. (2) an annuity due. b. Compare your findings in parts a (1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable? Explain why.
Present value of an ordinary annuity. Fill in the missing present values in the following table for an ordinary annuity. Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 ? 16 15% 0 $3,317.78 ? 29 4.5% 0 $674.57 ? 300 1% 0 $2,538.86 ? Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 $nothing (Round to the nearest cent.)
Calculate the present value of the following annuities, assuming each annuity payment is made at the end of each compounding period. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) 1. 2. 3. Annuity Payment $ 5,600 10,600 4,600 Annual Rate Interest Compounded Semiannually 9.0% 10.0% Quarterly 11.0% Annually Period Invested 3 years 2 years 5 years Present Value of Annuity
Use the table below to answer the following questions: Present Value of an Annuity of 1 Factor 1/2 Yr 1/2 Yr Full-Yr 0.9578 0.9578 0.9174 0.9174 0.8417 1.8753 1.7591 0.8787 0.7722 2.7540 2.5313 0.8417 0.7084 3.5957 3.2397 0.8062 0.6499 4.4019 3.8897 0.7722 0.5963 5.1740 4.4859 Assumption: Required annual effective rate (EPR) of return is 9%. Period 1 2 3 4 5 6 Present Value of 1 Factor O $250,193 O $279,396 O $291,703 O $273,380 Full-Yr 0.9174 If an investment pays you $54,000 every 6 months for 3 years, starting at the beginning of each 6 month period, what is its present value?

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