Annuity Present Value Inputs Payment Discount Rate/Period Number of Periods Present Value using a Time Line Period Cash Flows Present Value of Each Cash Flow Present Value Annuity Present Value using the Formula Present Value Annuity Present Value using the PV Function Present Value
Annuity Present Value Inputs Payment Discount Rate/Period Number of Periods Present Value using a Time Line Period Cash Flows Present Value of Each Cash Flow Present Value Annuity Present Value using the Formula Present Value Annuity Present Value using the PV Function Present Value
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
Related questions
Question
Transcribed Image Text:2. An annuity pays $80.00 each period for 5 periods. For these cash flows, the appropriate discount rate per period is 6.0%. What is the present value of this annuity? Use worksheet “Annuity-PV”.
![**Annuity Present Value Calculation**
### Inputs
- **Payment:**
- **Discount Rate/Period:**
- **Number of Periods:**
### Present Value using a Time Line
- **Period**
- **Cash Flows**
**Present Value of Each Cash Flow:**
[Placeholder for calculation]
**Present Value:**
[Highlighted cell for calculated present value]
### Annuity Present Value using the Formula
- **Present Value:**
[Highlighted cell for formula-based calculation]
### Annuity Present Value using the PV Function
- **Present Value:**
[Highlighted cell for PV function result]
This spreadsheet is designed to calculate the present value of an annuity using three different methods: a time line approach, a mathematical formula, and the present value (PV) function. Each method provides a way to determine how much a series of future cash flows is worth today, considering a specific discount rate and number of periods.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb6ea49f2-aec0-47e4-ae21-0e0a47907cd1%2Fc2d0283f-352d-4c0a-90e3-2c12bab016cd%2Fmxc7xjf_processed.png&w=3840&q=75)
Transcribed Image Text:**Annuity Present Value Calculation**
### Inputs
- **Payment:**
- **Discount Rate/Period:**
- **Number of Periods:**
### Present Value using a Time Line
- **Period**
- **Cash Flows**
**Present Value of Each Cash Flow:**
[Placeholder for calculation]
**Present Value:**
[Highlighted cell for calculated present value]
### Annuity Present Value using the Formula
- **Present Value:**
[Highlighted cell for formula-based calculation]
### Annuity Present Value using the PV Function
- **Present Value:**
[Highlighted cell for PV function result]
This spreadsheet is designed to calculate the present value of an annuity using three different methods: a time line approach, a mathematical formula, and the present value (PV) function. Each method provides a way to determine how much a series of future cash flows is worth today, considering a specific discount rate and number of periods.
Expert Solution
Step 1
Present value of annuity is the present value of all the stream of cash flows that occur in future.
Formula of present value of annuity is as follows:
Step by step
Solved in 3 steps with 2 images
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