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Find the present values of these ordinary annuities
Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent. a. $900 per year for 10 years at 8%. b. $450 per year for 5 years at 4%.
c. $600 per year for 5 years at 0%. d. Rework previous parts assuming they are annuities due. Present value of $900 per year for 10 years at 8%: $ Present value of $450 per year for 5 years at 4%: $ Present value of $600 per year for 5 years at 0%: $
0-- on Kry
Expert Solution
Computation of Present Value of Ordinary Annuities using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
a) $900 per year for 10 years at 8%:
Here,
PV = Present Value = ?
Rate = 8%
Nper = 10 Years
PMT = $900
FV = 0
Substituting the values in formula:
=-pv(8%,10,900,0)
PV or Present Value = $6,039.07
b) $450 per year for 5 years at 4%:
Here,
PV = Present Value = ?
Rate = 4%
Nper = 5 Years
PMT = $450
FV = 0
Substituting the values in formula:
=-pv(4%,5,450,0)
PV or Present Value = $2,003.32
c) $600 per year for 5 years at 0%:
Here,
PV = Present Value = ?
Rate = 0%
Nper = 5 Years
PMT = $600
FV = 0
Substituting the values in formula:
=-pv(0%,5,600,0)
PV or Present Value = $3,000
Computation of Present Value of Annuity Due using PV Function in Excel:
=-pv(rate,nper,pmt,fv,type)
a) $900 per year for 10 years at 8%:
Here,
PV = Present Value = ?
Rate = 8%
Nper = 10 Years
PMT = $900
FV = 0
Type = 1
Substituting the values in formula:
=-pv(8%,10,900,0,1)
PV or Present Value = $6,522.20
b) $450 per year for 5 years at 4%:
Here,
PV = Present Value = ?
Rate = 4%
Nper = 5 Years
PMT = $450
FV = 0
Type = 1
Substituting the values in formula:
=-pv(4%,5,450,0,1)
PV or Present Value = $2,083.45
c) $600 per year for 5 years at 0%:
Here,
PV = Present Value = ?
Rate = 0%
Nper = 5 Years
PMT = $600
FV = 0
Type = 1
Substituting the values in formula:
=-pv(0%,5,600,0,1)
PV or Present Value = $3,000
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