Chapter 12.II, Problem 17RE

### 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

# Solve the following exercises by using formulas.Present value of an ordinary annuity AnnuityPayment PaymentFrequency TimePeriod (yrs) Nominal Rate ( % ) InterestCompounded Present Value of the Annuity 17. $500 every 3 months 3 1 4 6.0 quarterly$5,865.77

To determine

To calculate: The present value of an ordinary annuities, where annuity payment is $500, the frequency of payment is 3 months, the time duration is 314 years, the nominal rate of return is 6% and interest is compounded quarterly. Explanation Given Information: Annuity payment is$500, the frequency of payment is 3 months, the time duration is 314 years, the nominal rate of return is 6% and interest is compounded quarterly.

Formula used:

The formula for the calculation of present value of an ordinary annuities is as,

PV=Pmt×1(1+i)ni

Where, PV is present value, Pmt is annuity payment, i is interest rate per period and n is number of periods.

Calculation:

Consider the provided information,

Annuity payment is \$500, the frequency of payment is 3 months, the time duration is 3.25 years, the nominal rate of return is 6% and interest is compounded quarterly.

Now, the interest rate period is 1.5%(6%÷4 period per year).

The number of periods is 13(3.25 years×4 period per year)

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