Answered: 2. What is the present value of an…

2. What is the present value of an annuity of P150,000 payable at the end of each 6-month period for 2 yea if money is worth 8% compounded semiannually?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

1. A certain fund currently has P100,000 and is invested
at 3% interest compounded annually. How much
withdrawal can be made at the end of each year so that
the fund will have zero balance at the end of years?
2. What is the present value of an annuity of P150,000
payable at the end of each 6-month period for 2 yea if
money is worth 8% compounded semiannually?
3. ABC bank pays interest at the rate of 2% compounded
quarterly. How much will Ken have in the bank at the
end of 5 years if he deposits P3,000 every month?

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