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Chapter 12.II, Problem 19RE
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### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

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BuyFindarrow_forward

### 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 19. $950 every year 8 2.9 annually To determine To calculate: The present value of an ordinary annuities, where annuity payment is$950, the frequency of payment is 1 year, the time duration is 8 years, the nominal rate of return is 2.9% and interest is compounded annually.

Explanation

Given Information:

Annuity payment is $950, the frequency of payment is 1 year, the time duration is 8 years, the nominal rate of return is 2.9% and interest is compounded annually. 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$950, the frequency of payment is 1 year, the time duration is 8 years, the nominal rate of return is 2.9% and interest is compounded annually.

Now, the interest rate per period is 2.9%(2.9%÷1 period per year).

The number of periods is 8(8 years×1 period per year).

Now, substitute n=8, i=0

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