Fund. of Financial Accounting - With Access
5th Edition
ISBN: 9781259636240
Author: PHILLIPS
Publisher: MCG
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Chapter AC, Problem AC.10ME
To determine
the present value tables to compute the present value of 10 equal payments of $15,000 with an interest rate of 10 percent.
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Direction: Solve what is being asked and show your complete and neat solution. (ROUND OF PV FACTORS TO 4 DECIMAL PLACES, ROUND OF FINAL ANSWER TO TWO DECIMAL PLACES. IN MCQs CHOOSE THE BEST ANSWER)
If a 5-year ordinary annuity has a present value of P1,000, and if the interest rate is 10 percent, what is the amount of each annuity payment?
Calculating the present value of an ordinary annuity) (Related to Checkpoint 6.2) Nicki Johnson, a sophomore mechanical engineering student, received a call from an insurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income. The annuities are as follows:
Annuity Purchase Price of the Annuity Amount of Money Received per Year Duration of the Annuity (years)
A $50,000 $8,500 12
B $60,000 $7,000 25
C $70,000 $8,000 20
Nicki could earn 11 percent on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 11 percent?
Topic: Annuity DueSolve and show the solution.
1. Find the amount and the present value of an annuity due of P125 every quarter for 9 yrs and 6 months, if money is worth 5% converted quarterly.
2. Find the amount and the present value of an annuity due of P212 every month for 5 years and 5 months, if money is worth 12% compounded monthly.
3. An investment of P550 is made at the beginning of each month for 6 years and 10 months. If interest is 6% compounded monthly, how much will the investment be worth at the of the term?
4. An investment of P330 is made at the beginning of each six months for 6 years and 10 months. If the interest is 3 ½ % converted semiannually, how much is the total investment?
5. Molly purchased a car. He paid P70,000 down payment and P1,050 payable at the beginning of each month for 5 ½% years. If money is worth 7% compounded monthly. What is the equivalent cash price of the car?
6. A dining set is bought for P2,400down payment and P150 payable at the beginning of…
Chapter AC Solutions
Fund. of Financial Accounting - With Access
Ch. AC - Prob. 1QCh. AC - Prob. 2QCh. AC - Which of the following is most likely to be an...Ch. AC - Prob. 4QCh. AC - Prob. 5QCh. AC - Prob. 6QCh. AC - Prob. 7QCh. AC - You are saving up for a Mercedes-Benz SLR McLaren,...Ch. AC - Prob. 2MCCh. AC - Prob. 3MC
Ch. AC - Prob. 4MCCh. AC - Prob. 5MCCh. AC - Assume you bought a car using a loan that requires...Ch. AC - Assume you bought a car using a loan that requires...Ch. AC - Which of the following statements is true? a. When...Ch. AC - Prob. 9MCCh. AC - Prob. 10MCCh. AC - Prob. AC.1MECh. AC - Prob. AC.2MECh. AC - Prob. AC.3MECh. AC - Prob. AC.4MECh. AC - Prob. AC.5MECh. AC - Prob. AC.6MECh. AC - Prob. AC.7MECh. AC - Prob. AC.8MECh. AC - Prob. AC.9MECh. AC - Prob. AC.10MECh. AC - Prob. AC.11MECh. AC - Prob. AC.12MECh. AC - Prob. AC.1ECh. AC - Prob. AC.2ECh. AC - Prob. AC.3ECh. AC - Prob. AC.4ECh. AC - Prob. AC.5ECh. AC - Computing Bond Issue Proceeds and Issue Price Your...Ch. AC - Computing Missing Present or Future Values...Ch. AC - Comparing Options Using Present Value Concepts...Ch. AC - Prob. AC.2CPCh. AC - Prob. AC.3CPCh. AC - Prob. AC.4CPCh. AC - Prob. AC.1PACh. AC - Recording Equipment Purchase with Two-Year Note...Ch. AC - Prob. AC.3PACh. AC - Prob. AC.4PACh. AC - Prob. AC.1PBCh. AC - Recording Equipment Purchase with Two-Year Note...Ch. AC - Prob. AC.3PBCh. AC - Prob. AC.4PB
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- I need help with this question. I need Present value (amount needed now to invest to receive annuity). Complete the following for the present value of an ordinary annuity. (Use Table 13.2.) (Do not round intermediate calculations. Round your answer to the nearest cent.) Amount of annuity expected Payment Time Interest rate Present value (amount needed now to invest to receive annuity) $14,500 Quarterly 4 years 8%arrow_forwardWhat is the present value of a 10-year annuity of $5,250 per period in which payments come at the beginning of each period? The interest rate is 11 percent. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. When using Appendix D to find the present value of this annuity due, subtract 1 from n and add 1 to the tablearrow_forwardUse a calculator to evaluate an ordinary annuity formula. For m, r, and t (respectively). Assume monthly payments. (Round your answer to the nearest cent). $100; 4%; 12 years.arrow_forward
- Computing Present Value of Annuity Payments Under Different Assumptions Compute the present value of the annuity stream for each of the four separate investment scenarios that follow. Round interest rate percentages to two decimal places in your calculations (for example, enter .0063 for .633333%). Round final answer to the nearest whole dollar. Do not use a negative sign with your answer. Investment 1 Investment 2 Investment 3 Investment 4 Annual interest rate 7% 6% 5% 8% Investment period in years 5 6 5 10 Compounding periods Quarterly Annually Semiannually Monthly Payment per compounding period $10,000 $36,000 $20,000 $2,000 First payment Beg. of period End of period End of period Beg. of period Present Value Answer Answer Answer Answerarrow_forwardWe can now use the following formula to find the present value of the account where the annuity payments are $400 each month. present value = table factor ✕ annuity payment The table factor was determined to be 21.67568. Before using the above formula, we must add 1 to the table factor since this is an annuity due. Thus, the table factor to use in the formula is 21.67568 + 1 = . Substitute the values into the formula, rounding the result to the nearest cent. present value = table factor ✕ annuity payment = ✕ 400 = $ Therefore, to receive annuity payments of $400 at the beginning of each month for 2 years, the amount that should be deposited now into an account earning 6% interest compounded monthly, to the nearest cent, is $ .arrow_forwardFind the present value of an annuity with payments of $1,250 at the end of each year for 7 years. The interest rate is 5% compounded annually. Question content area bottom Part 1 The present value of the annuity is $enter your response here. (Round the final answer to the nearest cent as needed.arrow_forward
- At a discount rate of 6.00%, find the present value of a perpetual payment of $ 1,000 per year. If the discount rate were lowered to 3.00%, half the initial rate, what would be the value of the perpetuity? Question content area bottom Part 1 a. If the discount rate were 6.00%, the present value of the perpetuity is $ enter your response here . (Round to the nearest cent.)arrow_forwardMick Mitchell wishes to have $120,000 in seven years. If he can earn annual interest of 12%, how much must he invest today? Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of S1 table.) (Click the icon to view Present Value of S1 table.) (Click the icon to view Future Value of S1 table.) OA. $265,320 В. $1,210 OC $54,240 OD. S111,960arrow_forwardGive typing answer with explanation and conclusion to all parts If $387674 is used to purchase an annuity earning 5.5% compounded monthly and paying $3102 at the end of each month, what will be the term of the annuity? Include the final, smaller annuity payment in the total. (Just state total months as a number, not years and months) What is N? What is I/Y? What is C/Y? What is P/Y? What is PV? What is PMT? What is FV?arrow_forward
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What is an Annuity? Are Annuities a Good Investment? Basics of an Annuity, a Whiteboard Animation; Author: Learn to invest;https://www.youtube.com/watch?v=Wq7nq8Gx78w;License: Standard YouTube License, CC-BY