Problem #2. Take a look at example 6 from section 12-6 named "Calculating Present Value of an Annuity by Formula". Solve the following problem using formulas only. Show your work.(a) What is the present of an ordinary annuity of $325 per month for 4 years at 6% interest compounded monthly?(b) What is the present value of this investment if it is an annuity due? Example 6Calculating Present Value of an Annuity by Formulaa. What is the present value of an ordinary annuity of $100 per month for 4 years at 6% interestcompounded monthly?b. What is the present value of this investment if it is an annuity due?Solution Strategya. For this present value of an ordinary annuity problem, we use i = .5% (6% ÷ 12) andn = 48 periods (4 years x 12 periods per year).1- (1+i)"PV = Pmt x-48(1+.005)PV = 100 x.005-481- (1.005)PV = 100 X.0051-.7870984111PV = 100 x.005.2129015889PV= 100 ×.005PV = 100 × 42.58031778 = $4,258.03Calculator Sequence:1 + .005yx 48 +/- M+ 1MR = +.005 x 100$4,258.03b. To solve as an annuity due rather than an ordinary annuity, multiply the present value of theordinary annuity by (1 + i) for one extra compounding period.(1+ i) × PVordinary annuity(1+ .005) x 4,258.03PVannuity duePVannuity duePVannuity due = (1.005) × 4,258.03 = $4,279.32Calculator Sequence: 1 + .005x 4,258.03$4,279.32

Name: Problem #2. Take a look at example 6 from section 12-6 named "Calculat
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Description: Problem #2. Take a look at example 6 from section 12-6 named "Calculating Present Value of an Annuity by Formula". Solve the following problem using formulas only. Show your work.(a) What is the present of an ordinary annuity of $325 per month for 4