Present Value of an Annuity

Determine the present value of $140,000 to be received at the end of each of four years, using an interest rate of 5.5%, compounded annually, as follows:

a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar.

First year	?
Second Year	?
Third Year	?
Fourth Year	?
Total present value	?

b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar ? What is the answer.

c. Why is the present value of the four $140,000 cash receipts less than the $560,000 to be received in the future? The present value is less due to over the 4 years? deflation, inflation, the computing of interest - what is the answer

deflationinflationthe compounding of interest

over the 4 years.

Please explain how you solve it and get the answer.

Exhibit 5 Present Value of $1 at Compound Interest 56% Periods 1 2 3 4 4% 0.96154 0.92456 0.88900 0.85480 0.82193 0.79031 0.75992 0.73069 0.70259 0.67556 47% 0.956940 0.915730 0.876300 0.838560 0.802450 0.767900 0.734830 0.703190 0.672900 0.643930 5% 0.95238 0.90703 0.86384 0.82270 0.78353 0.74622 0.71068 0.67684 0.64461 0.61391 6% 0.94340 0.89000 0.83962 0.79209 0.74726 0.70496 0.66506 0.62741 0.59190 0.55839 0.94787 0.89845 0.85161 0.80722 0.76513 0.72525 0.68744 0.65160 0.61763 0.58543 672% 0.93897 0.88166 0.82785 0.77732 0.72988 0.68533 0.64351 0.60423 0.56735 0.53273 5 7% 10% 11% 12% 13% 0.93458 0.90909 0.90090 0.89286 0.88496 0.87344 0.82645 0.81162 0.79719 0.78315 0.81630 0.75131 0.73119 0.71178 0.69305 0.76290 0.68301 0.65873 0.63552 0.61332 0.71299 062092 10.59345 0.56743 0.54276 066634 0.56447 0.53464 050663 0.62275 0.51316 0.48166 0.45235 042506 0.58201 0.46651 043393 0.40388 037616 0.54393 0.42410 0.39092 0.36061 033288 0.50835 0.38554 0.35218 0.32197 0.29459 0.48032 6 7 8 9 10 TOSHI ESC