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jenyasd209 [6]
4 years ago
8

Calculate the future value of the annuity assuming that it is (1) an ordinary annuity (2) an annuity due. Comparing the two type

s of annuities, all else equal, which type is more preferable
Mathematics
1 answer:
olga55 [171]4 years ago
8 0

Answer: Here's the complete question.

calculate the future value of the annuity assuming that it is (1) an ordinary annuity (2) an annuity due. Comparing the two types of annuities, all else equal, which type is more preferable? Why? Amount of annuity Interest rate Deposit period (years) $500 12% 6

Ordinary annuity = 4545, annuity due = 4058 , ordinary annuity is better because it discounts for one less year

Ordinary annuity = 4058, annuity due = 4545, annuity due is better because it discounts for one less year.

Ordinary annuity = 4058, annuity due = 4545, annuity due is better because it compounds for one more year.

Ordinary annuity = 4545, annuity due = 4058 , ordinary annuity is better because it compounds for one more year.

Step-by-step explanation:

Future value of ordinary annuity = Amount*[{(1+r)n – 1}/r]

= 500*[{(1.12)6 – 1}/0.12]

= $4,057.59

i.e. $4,058

Future value of annuity due = (1+r)*Future value of ordinary annuity

= 1.12*4,058

= $4,545

Hence, the answer is

Ordinary annuity = 4058, annuity due = 4545, annuity due is better because it compounds for one more year.

Since payments are made at the beginning of the year

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As per the concept of normal distribution, the two diameters of the bolt that has separate the top 3% and the bottom 3% are 5.2836 mm and 5.0764 mm respectively .

Normal distribution:

Normal distribution means the probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean and it has the bell shaped curve.

Given,

The diameters of bolts produced in a machine shop are normally distributed with a mean of 5.18 millimeters and a standard deviation of 0.07 millimeters.

Here we need to find the two diameters that separate the top 3% and the bottom 3% and these diameters could serve as limits used to identify which bolts should be rejected. we have also round off the result into nearest hundredth.

Here we have the given question with the values of,

The value of Mean is 5.18 millimeters

The value of Standard deviation is 0.07 millimeters.

Here we have to consider the following two cases, they are.

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We need to find x₁ such that that is P(X > x₁) = 3% when we convert it into decimal then we get P (X > x₁) = 0.03

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Case 2:

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Move the value to the other side

-0.1036 = x₂ - 5.18

When we simplify it,

x₂ =  5.0764

So, the diameter of the both with separate bottom 3% is 5.0764

To know more about Normal distribution here.

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