Bundle: Accounting, Loose-Leaf Version, 26th + CengageNOWv2, 2 term Printed Access Card
26th Edition
ISBN: 9781305617063
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 14, Problem 14.20EX
To determine
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
The increase or decrease in present value of winnings using an interest rate of 10% and 6%.
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6. Present Value of an Annuity
The table below contains information on four different
annuities.
a) Calculate the present value of each annuity if it is
i) An ordinary annuity
ii) An annuity due
b) Compare your findings. All else being identical, which type
of annuity-ordinary annuity or annuity due-is
preferable? Why?
Part Annual CF Interest Rate Deposit Period
A $12,000
B $52,000
C $20,000
D $24,000
8%
10%
6%
12%
(Years)
8
15
20
8
An annuity due is an annuity for which:
Question 10 options:
A)
the payments are made to repay a loan
B)
the payments are made at the beginning of each payment period
C)
the payments continue forever
D)
the payments are made at the end of each payment period
E)
the payment period is not the same as the conversion period
Problem 8: Present Value of an Annuity
Refer to each case in the table below to answer what are required in this problem.
Find the present value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
Compare your findings in parts a(1) and a(2). All else being identical, which type of
annuity—ordinary or annuity due—is preferable? Explain why
Chapter 14 Solutions
Bundle: Accounting, Loose-Leaf Version, 26th + CengageNOWv2, 2 term Printed Access Card
Ch. 14 - Describe the two distinct obligations incurred by...Ch. 14 - Explain the meaning of each of the following terms...Ch. 14 - If you asked your broker to buy you a 12% bond...Ch. 14 - Prob. 4DQCh. 14 - If bonds issued by a corporation are sold at...Ch. 14 - The following data relate to a 2,000,000, 8% bond...Ch. 14 - Bonds Payable has a balance of 5,000,000, and...Ch. 14 - What is a mortgage note?Ch. 14 - Fleeson Company needs additional funds to purchase...Ch. 14 - In what section of the balance sheet would a bond...
Ch. 14 - Prob. 14.1APECh. 14 - Alternative financing plans Brower co. is...Ch. 14 - Prob. 14.2APECh. 14 - Issuing bonds at face amount On January 1, the...Ch. 14 - Issuing bonds at a discount On the first day of...Ch. 14 - Issuing bonds at a discount On the first day of...Ch. 14 - Prob. 14.4APECh. 14 - Prob. 14.4BPECh. 14 - Prob. 14.5APECh. 14 - Prob. 14.5BPECh. 14 - Prob. 14.6APECh. 14 - Prob. 14.6BPECh. 14 - A Redemption of bonds payable A 1,500,000 bond...Ch. 14 - Prob. 14.7BPECh. 14 - Journalizing installment notes On the first day of...Ch. 14 - Journalizing installment notes On the first day of...Ch. 14 - Prob. 14.9APECh. 14 - Prob. 14.9BPECh. 14 - Effect of financing on earnings per share Domanico...Ch. 14 - Evaluate alternative financing plans Based on the...Ch. 14 - Prob. 14.3EXCh. 14 - Prob. 14.4EXCh. 14 - Entries for issuing bonds Gabriel Co. produces and...Ch. 14 - Prob. 14.6EXCh. 14 - Prob. 14.7EXCh. 14 - Prob. 14.8EXCh. 14 - Entries for issuing and calling bonds; gain Emil...Ch. 14 - Entries for installment note transactions On the...Ch. 14 - Prob. 14.11EXCh. 14 - Prob. 14.12EXCh. 14 - Reporting bonds At the beginning of the current...Ch. 14 - Prob. 14.14EXCh. 14 - Prob. 14.15EXCh. 14 - Prob. 14.16EXCh. 14 - Present value of amounts due Tommy John is going...Ch. 14 - Prob. 14.18EXCh. 14 - Prob. 14.19EXCh. 14 - Prob. 14.20EXCh. 14 - Prob. 14.21EXCh. 14 - Present value of bonds payable; premium Moss Co....Ch. 14 - Prob. 14.23EXCh. 14 - Appendix2 Amortize premium by interest method...Ch. 14 - Prob. 14.25EXCh. 14 - Prob. 14.26EXCh. 14 - Prob. 14.1APRCh. 14 - Prob. 14.2APRCh. 14 - Prob. 14.3APRCh. 14 - Entries for bonds payable and installment note...Ch. 14 - Prob. 14.5APRCh. 14 - Prob. 14.6APRCh. 14 - Effect of financing on earnings per share Three...Ch. 14 - Prob. 14.2BPRCh. 14 - Prob. 14.3BPRCh. 14 - Prob. 14.4BPRCh. 14 - Prob. 14.5BPRCh. 14 - Prob. 14.6BPRCh. 14 - Prob. 14.1CPCh. 14 - Ethics and professional conduct in business Solar...Ch. 14 - Prob. 14.3CPCh. 14 - Prob. 14.4CPCh. 14 - Prob. 14.5CPCh. 14 - Times interest earned The following financial data...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Question Suppose that a perpetual annuity has a present value of $33 million. What interest rate r would allow for perpetual annual payouts of $1.8 million? Express the interest rate as a decimal rounded to three decimal places. Do not include the dollar sign in your answer. Provide your answer below: ● Il CURMITarrow_forwardIn the time diagram below, which of the following concepts is depicted? 0 PV $1 2 $1 3 $1 O Present value of an annuity due O Future value of an ordinary annuity Present value of an ordinary annuity Future value of an annuity due 4 $1arrow_forwardQuestions attachedarrow_forward
- Question 1 Saved An annuity with periodic payments made at the end of each payment period is called: A) ordinary Oi general Cannuity due O simple Onone of the abovearrow_forward5. Future Value of an Annuity The table below contains information on four different annuities. a) Calculate the future value of each annuity if it is i) An ordinary annuity ii) An annuity due b) Compare your findings. All else being identical, which type of annuity-ordinary annuity or annuity due—is preferable? Why? Part Annual CF Interest Rate Deposit Period (Years) A $1,000 B $1,200 C $6,000 D $20,000 3% 6% 8% 12% 5825 12 15arrow_forward2: Future value of an ordinary annuity:arrow_forward
- 5.1 Annuity Period to the present value of an annuity? What happens to the future value? 5.2 Interest Rates What happens to the future value of an annuity if you increase the rate, r? What happens to the present value? As you increase the length of time паррens 5.3 Annuity Present Values Tri-State Megabucks Lottery advertises a $10arrow_forwardCalculate the future value of an annuity, with case A being an ordinary annuity and case B being an annuity due. SEE PIC for NUMBER DETAILSarrow_forwardPresent value of an ordinary annuity. Fill in the missing present values in the following table for an ordinary annuity. Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 ? 16 15% 0 $3,317.78 ? 29 4.5% 0 $674.57 ? 300 1% 0 $2,538.86 ? Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 $nothing (Round to the nearest cent.)arrow_forward
- Present value of an annuity Consider the following cases. Case ◄AUA- E Amount of annuity $ 12.000 55.000 700 140.000 22.500 Interest rate 12 20 5 10 Period (years) a. Calculate the present value of the annuity assuming that it is (1) An ordinary annuity, mu 9 7 b. Compare your findings in parts al 1) and a(2). All else being identical, which of annuity-ordinary or annuity due-is preferable? Explain why. Personal Finance Problem Tume value-Annuities - Marian Kirk wishes to select the better of two 10-year annuines, C and D. Annuity C is an ordinary annuity of $2,500 per year for 10 years. Annuity D is an annuity due of $2,200 per year for 10 years. delen future value of both annuities at the end of year 10, assuming thatarrow_forwardChapter 4, Question 1.arrow_forwardWhat is the future value?arrow_forward
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