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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

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

Use Table 12-2 to calculate the present value of the following annuities due.

AnnuityPayment Payment Frequency TimePeriod (years) NominalRate(%) InterestCompounded Present Value of the Annuity
10. $4,000 every year 18 7 annually

To determine

To calculate: The present value of annuities due, where annuity payment is $4,000, frequency of payment is 1 year, time duration is 18 years, nominal rate of return is 7% and interest is compounded annually.

Explanation

Given Information:

Annuity payment is $4,000, frequency of payment is 1 year, time duration is 18 years, nominal rate of return is 7% and interest is compounded annually.

Formula used:

The following steps are required to find the present value:

Step 1: Compute the number of periods of the annuity and then subtract one period from the total number of periods.

Step 2: Compute the rate of interest per period as,

Rate of interest=Nominal ratePeriods per year

Step 3: Use table 12-2, locate the factor of table at the intersection of the rate-per-period column and the number-of-periods row.

Step 4: Add 1.00000 in the ordinary annuity table factor to find the annuity due table factor.

Annuity due table factor=Ordinary annuity table factor+1.00000

Step 5: Compute the present value of annuity due as,

Present Value=Annuity due table factor×Annuity payment

Calculation:

Consider the provided information,

Annuity payment is $4,000, frequency of payment is 1 year, time duration is 18 years, nominal rate of return is 7% and interest is compounded annually.

Now, the rate per period is 7%(7%÷1 period per year)

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Chapter 12 Solutions

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Sect-12.I P-8RESect-12.I P-9RESect-12.I P-10RESect-12.I P-11RESect-12.I P-12RESect-12.I P-13RESect-12.I P-14RESect-12.I P-15RESect-12.I P-16RESect-12.I P-17RESect-12.I P-18RESect-12.I P-19RESect-12.I P-20RESect-12.I P-21RESect-12.I P-22RESect-12.I P-23RESect-12.I P-24RESect-12.II P-4TIESect-12.II P-5TIESect-12.II P-6TIESect-12.II P-1RESect-12.II P-2RESect-12.II P-3RESect-12.II P-4RESect-12.II P-5RESect-12.II P-6RESect-12.II P-7RESect-12.II P-8RESect-12.II P-9RESect-12.II P-10RESect-12.II P-11RESect-12.II P-12RESect-12.II P-13RESect-12.II P-14RESect-12.II P-15RESect-12.II P-16RESect-12.II P-17RESect-12.II P-18RESect-12.II P-19RESect-12.II P-20RESect-12.II P-21RESect-12.II P-22RESect-12.II P-23RESect-12.II P-24RESect-12.III P-7TIESect-12.III P-8TIESect-12.III P-9TIESect-12.III P-10TIESect-12.III P-1RESect-12.III P-2RESect-12.III P-3RESect-12.III P-4RESect-12.III P-5RESect-12.III P-6RESect-12.III P-7RESect-12.III P-8RESect-12.III P-9RESect-12.III P-10RESect-12.III P-11RESect-12.III P-12RESect-12.III P-13RESect-12.III P-14RESect-12.III P-15RESect-12.III P-16RESect-12.III P-17RESect-12.III P-18RESect-12.III P-19RESect-12.III P-20RESect-12.III P-21RESect-12.III P-22RESect-12.III P-23RESect-12.III P-24RESect-12.III P-25RECh-12 P-1CRCh-12 P-2CRCh-12 P-3CRCh-12 P-4CRCh-12 P-5CRCh-12 P-6CRCh-12 P-7CRCh-12 P-8CRCh-12 P-9CRCh-12 P-10CRCh-12 P-11CRCh-12 P-12CRCh-12 P-13CRCh-12 P-14CRCh-12 P-1ATCh-12 P-2ATCh-12 P-3ATCh-12 P-4ATCh-12 P-5ATCh-12 P-6ATCh-12 P-7ATCh-12 P-8ATCh-12 P-9ATCh-12 P-10ATCh-12 P-11ATCh-12 P-12ATCh-12 P-13ATCh-12 P-14ATCh-12 P-15ATCh-12 P-16ATCh-12 P-17ATCh-12 P-18ATCh-12 P-19ATCh-12 P-20ATCh-12 P-21ATCh-12 P-22ATCh-12 P-23ATCh-12 P-24ATCh-12 P-25ATCh-12 P-26ATCh-12 P-27ATCh-12 P-28ATCh-12 P-29ATCh-12 P-30ATCh-12 P-31ATCh-12 P-32ATCh-12 P-33ATCh-12 P-34ATCh-12 P-35AT

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