Problem 5-4 Calculating Annuity Present Values [LO 1]

An investment offers $8,600 per year for 17 years, with the first payment occurring 1 year from now. Assume the required return is 9 percent.

Requirement 1:

What is the value of the investment today? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 2:

What would the value be if the payments occurred for 42 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 3:

What would the value be if the payments occurred for 77 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 4:

What would the value be if the payments occurred forever? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Problem 5-14 Calculating EAR [LO 4]

First National Bank charges 11.8 percent compounded monthly on its business loans. First United Bank charges 12 percent compounded semiannually.

Requirement 1:

Calculate the EAR for each bank. (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

	EAR
First National Bank	%
First United Bank	%