Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here O in order to copy the contents of the data table below into a spreadsheet.) Amount of annuity Interest rate Deposit period (years) $6,000 8% 10 a. Calculate the future value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable as an investment? Explain why.
Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here O in order to copy the contents of the data table below into a spreadsheet.) Amount of annuity Interest rate Deposit period (years) $6,000 8% 10 a. Calculate the future value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable as an investment? Explain why.
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:Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here 9 in order to copy the contents of the data table below into a spreadsheet.)
Amount of annuity
Interest rate
Deposit period (years)
$6,000
8%
10
a. Calculate the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable as an investment? Explain why.
.....
a. (1) The future value of the ordinary annuity is $
(Round to the nearest cent.)
(2) The future value of the annuity due is $
(Round to the nearest cent.)
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity is preferable as an investment? (Select the best answer below.)
Ordinary annuity, because it yields a greater future value.
Annuity due, because it yields a greater future value.
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