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6
6. You purchase a car costing $35,000, and you finance it through a 6 year loan at 5% interest. amortization schedule for the first 6 months of car payments.
Mo.
Payment
Interest
Principal
Principal Balance
1
2
3
4
5
6
7. What is the future value of a 6-year ordinary annuity of $1500 if the appropriate interest rate is 8%? What is the present value of the annuity? What would the future and present values be if the annuity were an annuity due?
FV=
PV=
FVdue=
PVdue=
Expert Solution
7)
Computation of Future Value of Annuity using FV Function in Excel:
=-fv(rate,nper,pmt,pv)
Here,
FV = Future Value of Annuity = ?
Rate = 8%
Nper = 6 years
PMT = $1,500
PV = 0
Substituting the values in formula:
=-fv(8%,6,1500,0)
FV or Future Value of Annuity = $11,003.89
Computation of Present Value of Annuity using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value of Annuity = ?
Rate = 8%
Nper = 6 years
PMT = $1,500
FV = 0
Substituting the values in formula:
=-pv(8%,6,1500,0)
PV or Present Value of Annuity = $6,934.32
Computation of Future Value of Annuity Due using FV Function in Excel:
=-fv(rate,nper,pmt,pv,type)
Here,
FV = Future Value of Annuity = ?
Rate = 8%
Nper = 6 years
PMT = $1,500
PV = 0
type = 1
Substituting the values in formula:
=-fv(8%,6,1500,0,1)
FV or Future Value of Annuity = $11,884.21
Computation of Present Value of Annuity Due using PV Function in Excel:
=-pv(rate,nper,pmt,fv,type)
Here,
PV = Present Value of Annuity = ?
Rate = 8%
Nper = 6 years
PMT = $1,500
FV = 0
type = 1
Substituting the values in formula:
=-pv(8%,6,1500,0,1)
PV or Present Value of Annuity = $7,489.07
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