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Find the present value of the ordinary annuity. (Round your answer to the nearest cent.) Amount of Deposit Frequency Rate Time $400 quarterly 10% 25 yr

Find the present value of the ordinary annuity. (Round your answer to the nearest cent.) Amount of Deposit Frequency Rate Time $400 quarterly 10% 25 yr

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
Problem 1PS
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### Calculating the Present Value of an Ordinary Annuity To determine the present value of an ordinary annuity, you can use this example scenario. The annuity details are as follows: - **Amount of Deposit (m):** $400 - **Frequency (n):** Quarterly - **Rate (r):** 10% - **Time (t):** 25 years **Instructions:** 1. **Purpose:** Calculate the present value of the annuity based on the given parameters. 2. **Rounding:** Ensure the final answer is rounded to the nearest cent. **Additional Resources:** - **Need Help?** - You can select options such as **"Read It"** for more comprehensive instructions or **"Master It"** for practice problems. ### Explanation: - **Amount of Deposit (m):** This is the amount deposited regularly in the annuity, which is $400 in this case. - **Frequency (n):** The deposits are made quarterly. - **Rate (r):** The annual interest rate is 10%. - **Time (t):** This annuity lasts for a total period of 25 years. To effectively calculate the present value, use the formulas related to the present value of an annuity or use financial calculators/software for accurate computation.
Transcribed Image Text:### Calculating the Present Value of an Ordinary Annuity To determine the present value of an ordinary annuity, you can use this example scenario. The annuity details are as follows: - **Amount of Deposit (m):** $400 - **Frequency (n):** Quarterly - **Rate (r):** 10% - **Time (t):** 25 years **Instructions:** 1. **Purpose:** Calculate the present value of the annuity based on the given parameters. 2. **Rounding:** Ensure the final answer is rounded to the nearest cent. **Additional Resources:** - **Need Help?** - You can select options such as **"Read It"** for more comprehensive instructions or **"Master It"** for practice problems. ### Explanation: - **Amount of Deposit (m):** This is the amount deposited regularly in the annuity, which is $400 in this case. - **Frequency (n):** The deposits are made quarterly. - **Rate (r):** The annual interest rate is 10%. - **Time (t):** This annuity lasts for a total period of 25 years. To effectively calculate the present value, use the formulas related to the present value of an annuity or use financial calculators/software for accurate computation.
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