P5-20 Present value of an annuity Consider the following cases. Case Amount of annuity Interest rate Penod lyears) A $ 12,000 7% 55,000 700 12 20 B. 15 140,000 22500 a. Calculate the present 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, whih re of annuity-ordinary or annuity due is preferable? Explain why.
P5-20 Present value of an annuity Consider the following cases. Case Amount of annuity Interest rate Penod lyears) A $ 12,000 7% 55,000 700 12 20 B. 15 140,000 22500 a. Calculate the present 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, whih re of annuity-ordinary or annuity due is preferable? 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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![I P5-20 Present value of an annuity Consider the following cases.
Case
Amount of annuity
Interest rate
Penod lyears)
$12,000
55,000
A
12
200
20
140,000
22,500
10
a. Caleulate the present value of the annuity nssuming 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, whih
of annuity ordinary or annuity due-is preferable? Explain why.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1e8ec42b-b74f-4c13-8f5d-5a800e74a692%2F65c17614-0ff8-4c68-9524-e2494b2bbf38%2Fjfemkkj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:I P5-20 Present value of an annuity Consider the following cases.
Case
Amount of annuity
Interest rate
Penod lyears)
$12,000
55,000
A
12
200
20
140,000
22,500
10
a. Caleulate the present value of the annuity nssuming 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, whih
of annuity ordinary or annuity due-is preferable? Explain why.
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