Complete the following for the present value of an ordinary annuity. (Use Table 13.2) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Amount of annuity expected $ 14,300 Payment Quarterly Time 3 years Interest rate 8 % Present value (amount needed now to invest to receive annuity)
Complete the following for the present value of an ordinary annuity. (Use Table 13.2) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Amount of annuity expected $ 14,300 Payment Quarterly Time 3 years Interest rate 8 % Present value (amount needed now to invest to receive annuity)
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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Transcribed Image Text:Complete the following for the present value of an ordinary annuity. (Use: Table 13.2)
**Note: Do not round intermediate calculations. Round your answer to the nearest cent.**
| Amount of annuity expected | Payment | Time | Interest rate | Present value (amount needed now to invest to receive annuity) |
|----------------------------|------------|----------|---------------|----------------------------------------------------------------|
| $14,300 | Quarterly | 3 years | 8% | |
Transcribed Image Text:TABLE 13.2
Present value of an annuity of $1
This table presents the present value of an annuity of $1 for various interest rates and periods. The values in the table help in determining the present value of a series of future cash flows received over time, discounted at different interest rates.
### Columns
The columns represent different interest rates, ranging from 0.5% to 12%.
### Rows
The rows represent different periods, from 1 to 50.
### Table Description
The intersection of each row and column gives the present value of an annuity of $1 for the specified period and interest rate. For example, for a period of 10 years at an interest rate of 5%, the present value is 7.7217.
### Use Cases
- **Financial Planning**: Useful for calculating the present value of fixed cash inflows over multiple periods.
- **Investment Analysis**: Helps in assessing the attractiveness of an investment offering constant periodic returns at a certain discount rate.
- **Loan Amortization**: Assists in determining the present worth of future payments for loans or mortgages.
This table is a standard tool in finance to simplify calculations related to annuities and time value of money.
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