Question
Present value of an annuity Consider the following case.(Click on the icon located on the top-right corner of the data table below in order to
Present value of an annuityConsider the following case.(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
Amount of annuity | Interest rate | Period (years) |
|
$14 comma 00014,000 | 5% | 8 |
a.Calculate the present 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
annuitylong dashordinary
or annuity
duelong dashyields
a higher present value? Explain why.
The present value of the ordinary annuity is
$nothing.
(Round to the nearest cent.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started