An annuity of quarterly payments of P7,000 starts at the end of 4 years and end of 10 years. Find its present value if the interest rate is 8% compounded quarterly. a. Kind of annuity: b. Computation:

An annuity of quarterly payments of P7,000 starts at the end of 4 years and end of 10 years. Find its present value if the interest rate is 8% compounded quarterly. a. Kind of annuity: b. Computation:

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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[5P2] Directions: Determine the kind of annuity used in the following situations. Then, solve the problem. Show complete solutions.

An annuity of quarterly payments of P7,000 starts at the end of 4 years and end of 10 years. Find its present value if the interest rate is 8% compounded quarterly.

a. Kind of annuity:

b. Computation:

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Annuity Present Value Inputs Payment $80 Discount Rate/Period 6% Number of Periods Present Value using a Time Line Period 1 2 4 Cash Flows 80 80 80 80 80 Present Value of Each Cash Flow 75.4717 71.19972 67.16954 63.36749 59.78065 Present Value Annuity Present Value using the Formula Present Value Annuity Present Value using the PV Function Present Value
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