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