Please choose the BEST answer. s the future value of a 5-year ordinary annuity w
ID: 2382643 • Letter: P
Question
Please choose the BEST answer. s the future value of a 5-year ordinary annuity with annual payments of $200, 28. What is the future evaluated at a 15 percent interest rate? a. $ 670.44 h 842.91 e. $I,169.56 d. $1,522.64 e. $1,348.48 flows if the interest rate 29. What is is zero 25 Wher is the presen alu ling stream of future -cash flows if the End of year CFs Ysar 1000 (300) 0 900 (400) a. 1200 b. 0 c. 300 d. 600 e. 800 30. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, y decide to go to the Rocky Mountains to become a ski instructor rather than continue in ou school, so you close out your account. How much money will you receive? a. $1,171 b. $1,126 c. $1,082 d. $1,163 e. $1,008 31. What is the present value of a 5-year ordinary annuity with annual payments of S200, evaluated at a 15 percent interest rate? a. S 670.43 b. 842.91 c. S1,169.56 d. S1,348.48 e. $i,522.64
Explanation / Answer
Answer-28: Calculation of future value of annuity Future value of Annuity = Annual Payment * Future value annuity Factor Annual Payment = $200 Future value annuity Factor (5 years , 15%) = 6.7424 Hence Future value = 200 * 6.7424 = $1348.48 Answer-29: If the interest rate is 0, then present value = future value and hence the present value shall be some of future cash flows Henve present value = 1000-300+0+900-400 = $1200 Answer-30: Calculation of Compounded value Comounded value = Initial deposite * (1+r)^n r= rate of interest = 8% /4 = 2% quarterly n =number of quarters =18 months / 4 = 4 quarters Comounded value = 1000 * (1+0.02)^4 = 1000*1.082432 = 1082.43 Hence Answer is $1082 Answer-31: Calculation of Present value of annuity Present value of Annuity = Annual Payment * Present value annuity Factor Annual Payment = $200 Present value annuity Factor (5 years , 15%) = 3.352155 Hence Present value = 200 * 3.352155 = $670.43