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Chapter 12.II, Problem 22RE
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### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

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Section
BuyFindarrow_forward

### Contemporary Mathematics for Busin...

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

# Present value of an annuity due AnnuityPayment PaymentFrequency TimePeriod (yrs) Nominal Rate ( % ) InterestCompounded Present Value of the Annuity 22. $700 every 6 months 7 3.6 semiannually To determine To calculate: The present value of annuity due, where annuity payment is$700, frequency of payment is 6 months, time duration is 7 years, nominal rate of return is 3.6% and interest is compounded semiannually.

Explanation

Given Information:

Annuity payment is $700, frequency of payment is 6 months, time duration is 7 years, nominal rate of return is 3.6% and interest is compounded semiannually. Formula used: The formula to compute the present value of an annuity due is, PV=Pmt×1(1+i)ni×(1+i) 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$700, frequency of payment is 6 months, time duration is 7 years, nominal rate of return is 3.6% and interest is compounded semiannually.

The interest rate per period is 1.8%(3.6%÷2 period per year).

The number of periods is 14( 7years×2 period per year).

Now, substitute n=14, i=0

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