a.
To calculate:
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
a.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
Substitute $400 for C, 10% for i and 10 years for n in equation (I).
Hence, the future value of
b.
To calculate: Future value of
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
b.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
Substitute $200 for C, 5% for i and 5 years for n in equation (I)
The future value of
c.
To calculate: Future value of
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
c.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
The formula to calculate future value is,
Substitute $700 for C, 0% for i and 4 years for n.
The future value of
d.a.
To calculate: Future value of
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
d.a.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
The formula to calculate future value of annuity due is,
Here,
- FV is future value of annuity.
- C is the monthly payment.
- i is interest rate.
- n is number of payments.
Substitute $400 for C, 10% for i and 10 years for n in equation (II).
The future value of
b.
To calculate: Future value of
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
b.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
Substitute $200 for C, 5% for i and 5 years for n in equation (II).
The future value of
c.
To calculate: Future value of
Annuity: It is an agreement under which a person pays the lump sum payment or number of small transactions and in return, he gets the amount at later date or upon maturity. The purpose of annuity is not to break the flow of income after retirement.
c.
Explanation of Solution
Solution:
The formula to calculate value of
Here,
- FV is future value.
- C is monthly payment.
- i is interest rate.
- n is number of payments.
The formula to calculate future value is,
Substitute $700 for C, 0% for i and 4 years for n.
The future value of
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Chapter 5 Solutions
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
- Present Value of an Annuity. Find the present values of these ordinary annuities. Discounting occurs once a year. A) $600 per year for 12 years at 8% B) $300 per year for 6 years at 4% C) $500 per year for 6 years at 0% D) rework parts a,b, and c assuming they are annuities due. please show steps. Thank you.arrow_forwardFind the future values of these ordinary annuities.Compounding occurs once a year.a. $500 per year for 8 years at 14%b. $250 per year for 4 years at 7%c. $700 per year for 4 years at 0%d. Rework parts a, b, and c assuming they are annuities due.arrow_forwardFUTURE VALUE OF AN ANNUITY Find the future values of these ordinary annuities. Compounding occurs once a year. Round your answers to the nearest cent. A. $500 per year for 12 years at 16%. $ ______ B. $250 per year for 6 years at 8%. $ ______ C. $800 per year for 10 years at 0%. $ _______ Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent. D. $500 per year for 12 years at 16%. $ ________ E. $250 per year for 6 years at 8%. $ _________ F. $800 per year for 10 years at 0%. $ _______arrow_forward
- Find the present values of these ordinary annuities.Discounting occurs once a year.a. $600 per year for 12 years at 8%b. $300 per year for 6 years at 4%c. $500 per year for 6 years at 0%d. Rework parts a, b, and c assuming they are annuities due.arrow_forwardFind the present values of these ordinary annuities. Discounting occurs once a year. a. $600 per year for 12 years at 8% b. $300 per year for 6 years at 4% c. $500 per year for 6 years at 0% d. Rework parts a, b, and c assuming they are annuities due.arrow_forwardFind the future values of these ordinary annuities. Compounding occurs once a year. a.$ 500 per year for 8 years at 14% b. $250 per year for 4 years at 7% c $700 per year for 4 years at 0% d. Rework parts a, b, and c assuming they are annuities due. Please show all your work.arrow_forward
- Present value of an annuity) What is the present value of the following annuities? a. $2,400 a year for 10 years discounted back to the present at 11 percent. b. $90 a year for 3 years discounted back to the present at 9 percent. c. $290 a year for 12 years discounted back to the present at 12 percent. d. $500 a year for 6 years discounted back to the present at 5 percent. a. What is the present value of $2,400 a year for 10 years discounted back to the present at 11 percent? $nothing (Round to the nearest cent.)arrow_forwardQ. No. 02: Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. a) $300 per year for 10 years at 10% b) $100 per year for 5 years at 5% c) $300 per year for 5 years at 0% d) Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. Q.No. 03: Solve following time line, draw a clear diagram in your answer sheet. Assume opportunity cost of 12% 6 7 3 500 500 500 300 300 300 300 300 Q. No. 04: Discuss following terms with examples; a) Perpetuity b) Par Value c) Coupon Rate d) Zero-Coupon Bondarrow_forward