If a 5-year ordinary annuity has a present value of PHP50,000, and if the interest rate is 10 percent compounded annually, what is the amount of each annuity payment? Answer must have correct currency code and rounded off to the nearest hundredths

Finance Jan 16, 2021

If a 5-year ordinary annuity has a present value of PHP50,000, and if the interest rate is 10 percent compounded annually, what is the amount of each annuity payment?
Answer must have correct currency code and rounded off to the nearest hundredths. (Sample Formats: PHP1,234.00 ; PHP1,200.45 )-no space between letters, numbers, comma and period

Expert Solution

Computation of Amount of Each Annuity Payment using PMT Function in Excel:

=pmt(rate,nper,-pv,fv)

Here,

PMT = Amount of Each Annuity Payment = ?

Rate = Interest Rate = 10%

Nper = Number of Periods = 5 years

PV = Present Value of Ordinary Annuity = PHP50,000

FV = 0

Substituting the values in formula:

=pmt(10%,5,-50000,0)

PMT = 13,189.87

So, Amount of Each Annuity Payment is PHP13,189.87

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