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. $300 per year for 16 years at 6%.
b. $150 per year for 8 years at 3%.
c. $700 per year for 8 years at 0%.

Rework previous parts assuming they are annuities due.
d. Present value of $300 per year for 16 years at 6%:
e. Present value of $150 per year for 8 years at 3%:
f. Present value of $700 per year for 8 years at 0%:

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14-02-2022
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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. $300 per year for 16 years at 6%.
b. $150 per year for 8 years at 3%.
c. $700 per year for 8 years at 0%.

Rework previous parts assuming they are annuities due.
d. Present value of $300 per year for 16 years at 6%:
e. Present value of $150 per year for 8 years at 3%:
f. Present value of $700 per year for 8 years at 0%:

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anthougo anthougo · Answer 1 · 2022-02-23T13:02:34+01:00

a. The present value of $300 per year for 16 years at 6% is $3,031.77.

It is calculated using an online finance calculator as follows:

N (# of periods) = 16 years

I/Y (Interest per year) 6%

PMT (Periodic Payment) = 300

FV (Future Value) = $0

Results:

PV = $3,031.77

Sum of all periodic payments = $4,800.00

Total Interest $1,768.23

b. The present value of $150 per year for 8 years at 3% is $1,052.95.

It is calculated using an online finance calculator as follows:

(# of periods) = 8 years

I/Y (Interest per year) = 3%

PMT (Periodic Payment) = $150

FV (Future Value) = $0

Results:

PV = $1,052.95

Sum of all periodic payments = $1,200.00

Total Interest = $147.05

c. The present value of $700 per year for 8 years at 0% is $5,600.00.

It is calculated using an online finance calculator as follows:

N (# of periods) = 8 years

I/Y (Interest per year) = 0%

PMT (Periodic Payment) = $700

FV (Future Value) = $0

Results

PV = $5,600.00

Sum of all periodic payments = $5,600.00

d. The present value of $300 per year for 16 years at 6% as an annuity due is $3,213.67.

It is calculated using an online finance calculator as follows:

N (# of periods) = 16 years

I/Y (Interest per year) 6%

PMT (Periodic Payment) = 300

FV (Future Value) = $0

Results:

PV = $3,213.67

Sum of all periodic payments = $4,800.00

Total Interest = $1,586.33

e. The present value of $150 per year for 8 years at 3% as an annuity due is $1,084.54.

It is calculated using an online finance calculator as follows:

(# of periods) = 8 years

I/Y (Interest per year) = 3%

PMT (Periodic Payment) = $150

FV (Future Value) = $0

Results:

PV = $1,084.54

Sum of all periodic payments = $1,200.00

Total Interest = $115.46

f. The present value of $700 per year for 8 years at 0% as an annuity due is $5,600.

It is calculated using an online finance calculator as follows:

N (# of periods) = 8 years

I/Y (Interest per year) = 0%

PMT (Periodic Payment) = $700

FV (Future Value) = $0

Results

PV = $5,600.00

Sum of all periodic payments = $5,600.00

What is the difference between an ordinary annuity and an annuity due?

An ordinary annuity involves regular payments made at the end of each period, while an annuity due involves payments are made at the beginning of each period. For example, consistent quarterly stock dividends are an ordinary annuity just as monthly rent is an annuity due.

Data and Calculations:

a. $300 per year for 16 years at 6%

b. $150 per year for 8 years at 3%

c. $700 per year for 8 years at 0%

d. Present value of $300 per year for 16 years at 6%

e. Present value of $150 per year for 8 years at 3%

f. Present value of $700 per year for 8 years at 0%

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