Chapter 12, Problem 25AT

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Present value of an ordinary annuity Annuity Payment Time Nominal Interest Present Value Payment Frequency Period (years) Rate (%) Compounded of the Annuity 25. $1,500 every months 4 1.5 monthly To determine To calculate: The present value of ordinary annuities where annuity payment is$1,500, the frequency of payment is 1 a month, the time duration in 4 years, the nominal rate of return is 1.5% and interest is compounded monthly.

Explanation

Given Information:

Annuity payment is $1,500, the frequency of payment is 1 a month, the time duration in 4 years, the nominal rate of return is 1.5% and interest is compounded monthly. Formula used: The formula for future value of the ordinary annuity is, FV=Pmt×(1+i)n1i Here, FV is the future value, Pmt is the Annuity payment, i is the interest rate per period (nominal rate ÷ periods per year) and n is the number of periods (years × periods per year). Calculation: Consider that annuity payment is$1,500, the frequency of payment is 1 a month, the time duration in 4 years, the nominal rate of return is 1.5% and interest is compounded monthly.

The rate period is 0.125%(1.5%÷12 period per year).

The number of periods is 48(4 years×12 period per year).

Substitute 48 for a number of periods, 0

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