Loose Leaf For Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781260159547
Author: Phillips Associate Professor, Fred, Libby, Robert, Patricia
Publisher: McGraw-Hill Education
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Chapter C, Problem 9ME
To determine
To compute: the present value of $500,000 to be paid in 10 years with an interest rate of 8%.
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Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following
equations can be used to solve for the future value of an annuity due?
PMT x {[(1 + r)ª − 1]/r} x (1 + r)
O FV/(1 + r)¹
PMT x {[(1 + r)" - 1]/r}
O PMT x ({1 - [1/(1 + r)"]}/r) x (1 + r)
To calculate the withdrawal amount from an account in which you want to maintain a static balance, you use the __________________ formula.
Group of answer choices
Installment Payment
Simple Interest
Annuity
Compound Interest
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.
Chapter C Solutions
Loose Leaf For Fundamentals Of Financial Accounting
Ch. C - Prob. 1QCh. C - Prob. 2QCh. C - Which of the following is most likely to be an...Ch. C - Prob. 4QCh. C - Prob. 5QCh. C - Prob. 6QCh. C - Prob. 7QCh. C - You are saving up for a Mercedes-Benz SLR McLaren,...Ch. C - Prob. 2MCCh. C - Prob. 3MC
Ch. C - Prob. 4MCCh. C - Prob. 5MCCh. C - Assume you bought a car using a loan that requires...Ch. C - Assume you bought a car using a loan that requires...Ch. C - Which of the following statements is true? a. When...Ch. C - Prob. 9MCCh. C - Prob. 10MCCh. C - Prob. 1MECh. C - Prob. 2MECh. C - Prob. 3MECh. C - Prob. 4MECh. C - Prob. 5MECh. C - Prob. 6MECh. C - Prob. 7MECh. C - Prob. 8MECh. C - Prob. 9MECh. C - Prob. 10MECh. C - Prob. 11MECh. C - Prob. 12MECh. C - Prob. 1ECh. C - Prob. 2ECh. C - Prob. 3ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - Computing Bond Issue Proceeds and Issue Price Your...Ch. C - Computing Missing Present or Future Values...Ch. C - Prob. 1CPCh. C - Prob. 2CPCh. C - Prob. 3CPCh. C - Prob. 4CPCh. C - Prob. 1PACh. C - Recording Equipment Purchase with Two-Year Note...Ch. C - Prob. 3PACh. C - Prob. 4PACh. C - Prob. 1PBCh. C - Recording Equipment Purchase with Two-Year Note...Ch. C - Prob. 3PBCh. C - Prob. 4PB
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- Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Amount of annuity $5,000 Interest rate 6% Deposit period (years) 7 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.arrow_forwardPresent value of an annuity Consider the following case. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Amount of annuity Interest rate Period (years) $26,000 9% 4 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, which type of annuity—ordinary or annuity due—is preferable? Explain why.arrow_forwardChapter 4, Question 2. Please see attached. The second image is a similar question with answersarrow_forward
- Future value of an annuity Using the values below, answer the questions that follow. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Amount of annuity $4,000 Interest rate 5% Deposit period (years) 11 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.) Carrow_forwardUse the table below to answer the following questions: Present Value of an Annuity of 1 Factor 1/2 Yr 1/2 Yr Full-Yr 0.9578 0.9578 0.9174 0.9174 0.8417 1.8753 1.7591 0.8787 0.7722 2.7540 2.5313 0.8417 0.7084 3.5957 3.2397 0.8062 0.6499 4.4019 3.8897 0.7722 0.5963 5.1740 4.4859 Assumption: Required annual effective rate (EPR) of return is 9%. Period 1 2 3 4 5 6 Present Value of 1 Factor O $250,193 O $279,396 O $291,703 O $273,380 Full-Yr 0.9174 If an investment pays you $54,000 every 6 months for 3 years, starting at the beginning of each 6 month period, what is its present value?arrow_forwardPlease see attached imagesarrow_forward
- question: Identify the different types of annuities, calculate the present value and future value of both an ordinary annuity and an annuity due, and calculate the relevant annuity payments.arrow_forwardnnuity. Fill in the missing present values in the following table for an ordinary annuity: Future Value ate Data Table (Click on the following icon O in order to copy its contents into a spreadsheet) it Valuo $298 01 S3.396 92 S615 39 $2.459 07 6% 12% 2.5% 07% 18 0. 27 260 0. Print Done Check Aarrow_forwardIn order to compute the present value of an annuity, it is necessary to know the 1. discount rate. 2. number of discount periods and the amount of the periodic payments or receipts. ○ 1 O something in addition to 1 and 2 O both 1 and 2 ○ 2arrow_forward
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