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ent cash flows o

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Essentials Of Investments
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
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Please answer them in a comprehensice and detailed manner with step-by-step algorithm. Reject any form of excel shhet's solution. Just do it manually. 

(b) An ordinary annuity assumes equal payments at the end of each period over the life of the annuity. An annuity due is the same thing except the payments occur at the beginning of each period instead. Thus, a three-year annual annuity due would have periodic payment cash flows occurring at Years 0, 1, and 2, whereas a three- year annual ordinary annuity would have periodic payment cash flows occurring at year 1, 2, and 3. (i) (ii) Calculate the present value of a six-year ordinary annuity contract of RM525 payments at a 9.5% annual discount rate. Compute the present value of the same contract if it is an annuity due.
Transcribed Image Text:(b) An ordinary annuity assumes equal payments at the end of each period over the life of the annuity. An annuity due is the same thing except the payments occur at the beginning of each period instead. Thus, a three-year annual annuity due would have periodic payment cash flows occurring at Years 0, 1, and 2, whereas a three- year annual ordinary annuity would have periodic payment cash flows occurring at year 1, 2, and 3. (i) (ii) Calculate the present value of a six-year ordinary annuity contract of RM525 payments at a 9.5% annual discount rate. Compute the present value of the same contract if it is an annuity due.
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