Calculate the present value of each of the following annuity amounts based on the reasonable interest rate that is specified and the number of time periods.
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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.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.FUTURE VALUE OF AN ANNUITY Find 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.
- 7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions. Which of the following statements about annuities are true? Check all that apply. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. An annuity due earns more interest than an ordinary annuity of equal time. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) Katie had a high monthly food bill…Future Value of an Annuity Calculate the future value. Present Value Interest Rate $0.00 10% monthly Payments $475.00 monthly Number of Payments per Year: PY= a. Determine the annuity type. O Ordinary Simple Annuity O Ordinary General Annuity O Simple Annuity Due O General Annuity Due b. Identify the following pieces of information to be used to calculate the future value of the annuity. Periodic Payment: PMT Total Number of Payments: N= Annual Interest Rate: r = Number of Compoundings per Year: CY c. Determine the future value of the annuity. Timing of Payment Years End 19 = Future Value ???Calculate the future value. Present Value Interest Rate $0.00 8% monthly Payments $500.00 monthly Timing of Payment Years End Future Value 24 ??? a. Determine the annuity type. Ordinary Simple Annuity Ordinary General Annuity O Simple Annuity Due General Annuity Due b. Identify the following pieces of information to be used to calculate the future value of the annuity. Periodic Payment: PMT = Number of Payments per Year: PY = Total Number of Payments: N = Annual Interest Rate: r = = Number of Compoundings per Year: CY = c. Determine the future value of the annuity.
- 7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions. A. Which of the following statements about annuities are true? Check all that apply. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. An annuity due earns more interest than an ordinary annuity of equal time. B. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) C. Luana loves shopping…Future value of an ordinary annuity. Fill in the missing future values in the following table for an ordinary annuity. Number of Payments or Years Annual Interest Rate Present Value Annuity Future Value 10 9% 0 $286.87 ? 18 16% 0 $1,397.76 ? 30 2.5% 0 $721.92 ? 280 1% 0 $553.71 ? Number of Payments or Years Annual Interest Rate Present Value Annuity Future Value 10 9% 0 $286.87 $nothing (Round to the nearest cent.) 18 16% 0 $1,397.76 $nothing (Round to the nearest cent.) 30 2.5% 0 $721.92 $nothing (Round to the nearest cent.) 280 1% 0 $553.71 $nothing (Round to the nearest cent.)Individual Assessment 1.a: Simple Ordinary Annuity Directions: Calculate the future value of #1, 2, & 3 and present value of #4 & 5. Mode of Payment Annually Monthly Quarterly Length of Annuity 3 years 5 years 4 years Length of Annuity 10 years 2 years Principal Interest Future Rate Value 1. P20,000 2% 2. P1,500 7% 3. P4,300 3.50% Principal Interest Mode of Present Rate Payment Value Semi-annually Bimonthly 4. P5,000 3.20% 5. P3,800 6%
- 7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as "lump sums," and annuities. Based on your understanding of annuities, answer the following questions. Which of the following statements about annuities are true? Check all that apply. O An annuity is a series of egual payments made at fixed intervals for a specified number of periods. O Ordinary annuities make fixed payments at the beginning of each period for a certain time period. O An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. O An annuity due earns more interest than an ordinary annuity of equal time. Which of the following is an example of an annuity? O An investment in a certificate of deposit (CD) A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time Luana loves shopping for clothes, but considering the state of the economy, she has decided…Present value of an ordinary annuity. Fill in the missing present values in the following table for an ordinary annuity. Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 ? 16 15% 0 $3,317.78 ? 29 4.5% 0 $674.57 ? 300 1% 0 $2,538.86 ? Number of Payments or Years Annual Interest Rate Future Value Annuity Present Value 5 8% 0 $213.22 $nothing (Round to the nearest cent.)Find the future value of the following ordinary annuity. Periodic Payment Payment Interval Term Interest Rate Conversion Period $3440 1 year 4 years 12% semi-annually