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Homework answers / question archive / Chapter Annuities Future value and present value of an ordinary simple annuity Future value and present value of an ordinary general annuity Joshua secured a 3-year car lease at 5
Chapter Annuities
Future value and present value of an ordinary simple annuity
Future value and present value of an ordinary general annuity
Joshua secured a 3-year car lease at 5.90% compounded annually that required her to make payments of $887.57 at the beginning of each month. Calculate the cost of the car if she made a downpayment of $3,750.
First we calculate Present value of Annuity using PV Function in Excel:
=-pv(rate,nper,pmt,fv,type)
Here,
PV = Present Value of Annuity = ?
Rate = 5.90%/12
Nper = 3 Years*12 = 36
PMT = $887.57
FV = 0
Type = 1
Substituting the values in formula:
=-pv(5.90%/12,36,887.57,0,1)
PV or Present Value of Annuity = $29,362.49
Cost of Car = Present Value of Annuity + Down Payment
= $29,362.49 + $3,750
Cost of Car = $33,112.49
