Find the present value and the amount (future value) of an ordinary annuity of Php5,000 payable semiannually for 10years if money is worth 6% compounded semiannually

Finance Jan 18, 2021

Find the present value and the amount (future value) of an ordinary annuity of Php5,000 payable semiannually for 10years if money is worth 6% compounded semiannually.

Expert Solution

Computation of Present Value of Ordinary Annuity (PV):

PV = P[1 - (1 + i)-n] / i

Here,

PV - Present Value

P- Periodic/Regular Payment

i - interest rate per period i = j/m

n- total number of conversion periods

n = t * m

PV = 5,000*[1 - (1 + 3%)^-20] / 3% = 74,387.37

Computation of Future Value of Ordinary Annuity (PV):

FV = P[ (1 + i)^n] -1 / i

Here,

FV - Future Value

P- Periodic/Regular Payment

i - interest rate per period i = j/m

n- total number of conversion periods

n = t * m

FV = 5,000*[(1 + 3%)^20] - 1/3% = 134,351.87

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