FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Chapter AG, Problem G.21BE
To determine
Present Value: The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:
To Calculate: The number of periods of an annuity.
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Kevin Morales invests $7,302.63 now for a series of $1,500 annual returns beginning one year from now. Kevin will earn a return of 10% on the initial investment. How many annual payments of $1,500 will Kevin receive?
Steven Garcia invests $14,404.31 now for a series of $2,700 annual returns beginning one year from now. Steven will earn a return of
10% on the initial investment.
Click here to view the factor table 1.
Table 2
Table 3
Table 4
How many annual payments of $2,700 will Steven receive? (Hint: Use Table 4.) (For calculation purposes, use 5 decimal places as displayed
in the factor table provided, e.g. 5.24571. Round answer to O decimal places, e.g. 25.)
Number of annual payments
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An investor is considering an investment that will pay $2,280 at the end of each year for the next
10 years. He expects to earn a return of 12 percent on his investment, compounded annually.
Required:
a. How much should he pay today for the investment?
b. How much should he pay if the investment returns are received at the beginning of each year?
(For all requirements, do not round intermediate calculations and round your final answers to
the nearest whole dollar amount.)
a. Present value of ordinary annuity
b. Present value of annuity due
Chapter AG Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
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