Two annuities have equal present values and an applicable discount rate of 7.25 percent. One annuity pays $2,500 on the first day of each year for 15 years. How much does the second annuity pay each year for 15 years if it pays at the end of each year? I was able to calculate the beginning. But I can't calculate the end. The answer shared with me is $2,681.25. N=15; I/Y=7.25%; PMT=2,500; FV=0; FIND PV. ON EXCEL I ENTERED: PV(7.25%, 15, 2,5000, 0, 1) I got $24,039.61 But I put in the same information in excel and change the 1 to a 0 to get the end of the period. PV(7.25%, 15, 2,5000, 0, 0) But I get $22,414.56 so my difference is $24,039.61 - $22,414.56 = $1,625.06 Can you show me how to solve it?
Two annuities have equal present values and an applicable discount rate of 7.25 percent. One annuity pays $2,500 on the first day of each year for 15 years. How much does the second annuity pay each year for 15 years if it pays at the end of each year? I was able to calculate the beginning. But I can't calculate the end. The answer shared with me is $2,681.25. N=15; I/Y=7.25%; PMT=2,500; FV=0; FIND PV. ON EXCEL I ENTERED: PV(7.25%, 15, 2,5000, 0, 1) I got $24,039.61 But I put in the same information in excel and change the 1 to a 0 to get the end of the period. PV(7.25%, 15, 2,5000, 0, 0) But I get $22,414.56 so my difference is $24,039.61 - $22,414.56 = $1,625.06 Can you show me how to solve it?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 24P
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I was able to calculate the beginning. But I can't calculate the end. The answer shared with me is $2,681.25.
N=15; I/Y=7.25%; PMT=2,500; FV=0; FIND PV.
ON EXCEL I ENTERED:
PV(7.25%, 15, 2,5000, 0, 1)
I got $24,039.61
But I put in the same information in excel and change the 1 to a 0 to get the end of the period.
PV(7.25%, 15, 2,5000, 0, 0)
But I get $22,414.56
so my difference is $24,039.61 - $22,414.56 = $1,625.06
Can you show me how to solve it?
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