Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 5, Problem 5.60P
Summary Introduction
To calculate: Time period.
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The future value of an annuity due is:
one period after the final payment.
one period before the final payment.
at the same point in time as the final payment.
From the table below, answer comprehensively the following subparts:
a. Which plan do you prefer? Why?
b. How does duration affect the future value of an annuity?
c. How does compounding period affect the future value of an annuity?
The future value of an annuity due is determined one period after the first cash flow in the series.
a.True
b.False
Chapter 5 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 5.1 - What is the difference between future value and...Ch. 5.1 - Define and differentiate among the three basic...Ch. 5.2 - Prob. 5.3RQCh. 5.2 - Prob. 5.4RQCh. 5.2 - Prob. 5.5RQCh. 5.2 - Prob. 5.6RQCh. 5.2 - Prob. 5.7RQCh. 5.3 - What is the difference between an ordinary annuity...Ch. 5.3 - What are the most efficient ways to calculate the...Ch. 5.3 - How can the formula for the future value of an...
Ch. 5.3 - Prob. 5.13RQCh. 5.3 - Prob. 5.14RQCh. 5.4 - How do you calculate the future value of a mixed...Ch. 5.5 - What effect does compounding interest more...Ch. 5.5 - Prob. 5.21RQCh. 5.5 - Differentiate between a nominal annual rate and an...Ch. 5.5 - Prob. 1FOECh. 5.6 - Prob. 1FOPCh. 5.6 - How can you determine the size of the equal,...Ch. 5.6 - Prob. 5.27RQCh. 5.6 - How can you determine the unknown number of...Ch. 5 - Learning Goals 2, 5 ST5-1 Future values for...Ch. 5 - Prob. 5.3STPCh. 5 - Learning Goal 6 ST5-4 Deposits needed to...Ch. 5 - Assume that a firm makes a 2,500 deposit into a...Ch. 5 - Prob. 5.2WUECh. 5 - Prob. 5.3WUECh. 5 - Your firm has the option of making an investment...Ch. 5 - Joseph is a friend of yours. He has plenty of...Ch. 5 - Jack and Jill have just had their first child. If...Ch. 5 - Prob. 5.1PCh. 5 - Learning Goal 2 P5-2 Future value calculation...Ch. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Learning Goal 2 P5- 6 Time value As part of your...Ch. 5 - Learning Goal 2 P5-7 Time value you can deposit...Ch. 5 - Learning Goal 2 P5-8 Time value Misty needs to...Ch. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.11PCh. 5 - Prob. 5.12PCh. 5 - Prob. 5.13PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.15PCh. 5 - Prob. 5.16PCh. 5 - Cash flow investment decision Tom Alexander has an...Ch. 5 - Learning Goal 2 P5-18 Calculating deposit needed...Ch. 5 - Future value of an annuity for each case in the...Ch. 5 - Present value of an annuity Consider the following...Ch. 5 - Prob. 5.21PCh. 5 - Learning Goal 3 P5-22 Retirement planning Hal...Ch. 5 - Learning Goal 3 P5-23 Value of a retirement...Ch. 5 - Prob. 5.24PCh. 5 - Learning Goal 2, 3 P5-25 Value of an annuity...Ch. 5 - Prob. 5.26PCh. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29PCh. 5 - Prob. 5.30PCh. 5 - Prob. 5.31PCh. 5 - Prob. 5.32PCh. 5 - Prob. 5.33PCh. 5 - Prob. 5.34PCh. 5 - Prob. 5.35PCh. 5 - Prob. 5.36PCh. 5 - Prob. 5.37PCh. 5 - Prob. 5.38PCh. 5 - Prob. 5.39PCh. 5 - Prob. 5.40PCh. 5 - Learning Goals 3, 5 P5-42 Annuities and...Ch. 5 - Prob. 5.42PCh. 5 - Prob. 5.43PCh. 5 - Prob. 5.44PCh. 5 - Prob. 5.45PCh. 5 - Prob. 5.46PCh. 5 - Prob. 5.47PCh. 5 - Loan amortization schedule Joan Messineo borrowed...Ch. 5 - Prob. 5.49PCh. 5 - Prob. 5.50PCh. 5 - Prob. 5.51PCh. 5 - Prob. 5.52PCh. 5 - Prob. 5.53PCh. 5 - Prob. 5.54PCh. 5 - Prob. 5.55PCh. 5 - Prob. 5.56PCh. 5 - Prob. 5.57PCh. 5 - Number of years needed to acccumulate a future...Ch. 5 - Prob. 5.59PCh. 5 - Prob. 5.60PCh. 5 - Time to repay Installment loan Mia Saito wishes to...Ch. 5 - Prob. 5.62P
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- Which of the following changes would increase the present value of a future payment? (check all that apply) Decrease in the number of years until the future payment is received Increase in the interest rate Increase in the amount of the payment Decrease in the interest rate Increase in the number of years until the future payment is receivedarrow_forwardShow that the present value of annuaity due is one period accumulated value of the present value of annuity immediate.arrow_forwarda. Calculate the annual cash flows ( annuity payments) from a fixed- payment annuity if the present value of the 20-year annuity is $1.4 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of the current year. b. Calculate the annual cash flows (annuity payments) from a fixed - payment annuity if the present value of the 20-year annuity is $1.4 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of six years.arrow_forward
- The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the beginning of every six months O An annuity that pays $500 at the end of every six months O An annuity that pays $1,000 at the beginning of each year O An annuity that pays $1,000 at the end of each year An ordinary annuity selling at $4,947.11 today promises to make equal payments at the end of each year for the next eight years (N). If the annuity's appropriate interest rate (1) remains at 6.50% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $35,000,000, paid in eight equal annual payı The first payment on the lottery jackpot will be made today. In present value terms, you really won -assuming…arrow_forwardGiven the following information, calculate the rate of return. price = $501.88time to maturity = 10 yearsannual payment = $100type = ordinary annuityarrow_forwardIn the present value of an annuity due table, the factors ________. Group of answer choices decrease as the interest rates increase, given a set number of periods decrease as the periods increase, given a set interest rate increase as the periods decrease, given a set interest rate increase as the interest rates increase, given a set number of periodsarrow_forward
- A lump sum amount of money that must be deposited now to provide a specified series of equal payments (annuity) in the future is known as the future value of an annuity. O True O Falsearrow_forward(b) Find the present value of an annuity-immediate such that payments start at 1, increase by annual amounts of 1 to a payment of , and the decrease by annual amounts of 1 to a final payment of 1.arrow_forwardCalculate the compounding factor that would be used to determine the future value of an annuity for an investment of 5.32 years if the appropriate rate of return was set at 8.54 %. a. 6.3988 b. 1.5465 c. 31.4461 d. 5.2618 e. 3.9816arrow_forward
- Each payment of an annuity due is compounded for one compounded for one Select- -Select- v period, so the future value of an annuity due is equal to the future value of an ordinary annuity v period. The equation is: FVAdue=FVAordinary (1 + I) The present value of an ordinary annuity, PVAN, is the value today that would be equivalent to the annuity payments (PMT) received at fixed intervals over the annuity period. The equation is: 1- (1+1)N PVAN= PMT Each payment of an annuity due is discounted for one -Select- period, so the present value of an annuity due is equal to the present value of an ordinary annuity multiplied by (1 + I). The equation is: DVA זדתarrow_forwardFor each of the following cases, calculate the present value of the annuity, assuming the annuity cash flows occur at the end of each year. SEE DETAILS IN PICarrow_forwardMany assets provide a series of cash inflows over time; and many obligations require a series of payments. When the payments are equal and are made at fixed intervals, the series is an annuity. There are three types of annuities: (1) Ordinary (deferred) annuity, (2) Annuity due, and (3) Growing annuity. One can find an annuity's future and present values, the interest rate built into annuity contracts, and the length of time it takes to reach a financial goal using an annuity. Growing annuities are often used in the area of financial planning. Their analysis is more complex and often easier solved using a financial spreadsheet, so we will limit our discussion here to the first two types of annuities. The future value of an ordinary annuity, FVAN, is the total amount one would have at the end of the annuity period if each payment (PMT) were invested at a given interest rate and held to the end of the annuity period. The equation is: FVAN= PMT Each payment of an annuity due is compounded…arrow_forward
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