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3 years ago

Suppose you are going to receive $13,200 per year for five years. The appropriate interest rate is 8.1 percent.

Business

1 answer:

sertanlavr [38]3 years ago

5 0

Answer:

a-1) Pv = 52549

a-2) Pv = 56822

b-1) Fv = 77570

b-2 Fv = 83878

Explanation:

b-1) Future value:

S= Sum of amount of annuity=?

n=number of fixed periods=5 years

R=Fixed regular payments=13200

i=Compound interest rate= .081 (suppose annualy)

we know that ordinary annuity:

S= R [(1+i)∧n-1)]/i

= 13200[(1+.081)∧5-1]/.081

=13200(1.476-1)/.081

= 13200 * 5.8765

S = 77570

a.1)Present value of ordinary annuity:

Formula: Present value = C* [(1-(1+i)∧-n)]/i

=13200 * [(1-(1+.081)∧-5]/.081

=13200 * (1-.6774)/.081

=13200 * (.3225/.081)

=52549

a.2)Present value of ordinary Due:

Formula : Present value = C * [(1-(1+i)∧-n)]/i * (1+i)

= 13200 * [(1- (1+.081)∧-5)/.081 * (1+.081)

= 13200 * 3.9822 * 1.081

= 56822

b-2) Future value=?

we know that: S= R [(1+i)∧n+1)-1]/i ] -R

= 13200[ [ (1+.081)∧ 5+1 ]-1/.081] - 13200

= 13200 (.5957/.081) -13200

= (13200 * 7.3544)-13200

= 97078 - 13200

= 83878

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