   Chapter 12, Problem 28AT ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

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

# Present value of an annuity due Annuity Payment Time Nominal Interest Present Value Payment Frequency Period (years) Rate (%) Compounded of the Annuity 28. $600 every year 20 4.3 annually To determine To calculate: The present value of annuities due where monthly deposit at the beginning of the month is$600, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 4.3% and interest is compounded annually.

Explanation

Given Information:

Monthly deposit at the beginning of the month is $600, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 4.3% and interest is compounded annually. Formula used: The formula to compute the present value of annuity due is, PV=Pmt×1(1+i)ni×(1+i) Where, PV is the present value, Pmt is the Annuity payment, i is the interest rate per period, n is the number of periods. Calculation: Consider that monthly deposit at the beginning of the month is$600, frequency of payment is 1 year, time duration is 20 years, nominal rate of return is 4.3% and interest is compounded annually.

The rate period is 4.3%(4.3%÷1 period per year).

The number of periods is 20(20 years×1 period per year).

Substitute 20 for number of periods, 0.043 for interest rate per period, \$600 for Pmt in the formula

PV=Pmt×1(1+i)ni×(1+i)

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