Answer:
The present value of:
a. $6,000 received each year for 6 years on the last day of each year if your investments pay 7 percent compounded annually.
= PV = $28,599.24
b. $6,000 received each quarter for 6 years on the last day of each quarter if your investments pay 7 percent compounded quarterly.
PV = $116,764.11
c. $6,000 received each year for 6 years on the first day of each year if your investments pay 7 percent compounded annually.
PV = $28,599.24
d. $6,000 received each quarter for 6 years on the first day of each quarter if your investments pay 7 percent compounded quarterly.
PV = $118,807.49
Explanation:
a) Data and Calculations:
Annuity streams per year or quarter = $6,000
Period of annuity = 6 years
Interest rate = 7% compounded
From an online financial calculator:
a. N (# of periods) 6
I/Y (Interest per year) 7
PMT (Periodic Payment) 6000
FV (Future Value) 0
Results
PV = $28,599.24
Sum of all periodic payments $36,000.00
Total Interest $7,400.76
b. N (# of periods) 24
I/Y (Interest per year) 1.75
PMT (Periodic Payment) 6000
FV (Future Value) 0
Results
PV = $116,764.11
Sum of all periodic payments $144,000.00
Total Interest $27,235.89
c. N (# of periods) 6
I/Y (Interest per year) 7
PMT (Periodic Payment) 6000
FV (Future Value) 0
Results
PV = $28,599.24
Sum of all periodic payments $36,000.00
Total Interest $7,400.76
d. N (# of periods) 24
I/Y (Interest per year) 1.75
PMT (Periodic Payment) 6000
FV (Future Value) 0
Results
PV = $118,807.49
Sum of all periodic payments $144,000.00
Total Interest $25,192.51
