Rank the following from highest present value to lowest present value. Assume all else equal. v An annuity with 10 payments An annuity due with 15 payments A perpetuity v An annuity with 15 payments
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Present value of annuity is the current value of the future payments that are calculated using the interest rate or discount rate , the future cash flow is discounted to find the present value.
The formula of which is:
Present Value of periodic payment= P* (1- (1+r)-n)/r
Where,
P= periodic payments
r= rate of interest
n= number of period
And
Present Value of a single cash flow= Future Value / (1 + interest rate%)^n
Where,
n= number of period
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- Annuity A and B are exactly the same except that annuity A has 5 payments and annuity B has 7 payments, which one has the higher future value? Select one: a. B b. A=B c. AAnnuity A and B are exactly the same except that annuity A has an interest rate of 4% and annuity B has an interest rate of 5%, which one has the higher future value? Select one: a. B b. A=B c. AIf annuity A has 30 payments of $500 at an interest rate of 10% and annuity B has 30 payments of $500 at an interest rate of 9%, which one has the higher present value? Select one: a. Not enough information to determine. b. B c. A
- Prove: FVA of an Ordinary Annuity times (1+i) = FVA of an Annuity Due, where i= interest rate. SHow all workWhich of following formulas is used to calculate the present value of a perpetual annuity? Seleccione una: a. P= f / (1+i)^n b. P= f / (i - g) c. P= a / (i - g) d. P= a / (1+i)^n e. F = P * (1+i)^nThe present value of a perpetuity is equal to the payment on the annuity, PMT, divided bythe interest rate, I : PV = PMT/I. What is the future value of a perpetuity of PMT dollars peryear? (Hint: The answer is infinity, but explain why.)
- Select all the statements on perpetuities that are correct. a. The present value of a perpetuity increases if the interest rate increases. b. If I multiply the present value of a perpetuity with the interest rate then I get the value of a single payment of the cashflow stream. c. The present value value of a perpetuity is independent of the interest rate. d. The present value of a perpetuity is infinite as all the payments add up to infinity. e. A perpetuity describes a constant cashflow at the end of each year that continues infinitely long.Calculate the future value of an annuity, with case A being an ordinary annuity and case B being an annuity due. SEE PIC for NUMBER DETAILSUsing an annuity, you may calculate the present value of a single payment or a series of payments you will receive. Is this statement correct or incorrect?