Question

Using the appropriate present value table and assuming a 12%
annual interest rate, determine the present value on December 31,
2018, of a five-period annual annuity of $4,400 under each of the
following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) **(Use appropriate factor(s) from
the tables provided.)**

**1.**The first payment is received on December 31,
2019, and interest is compounded annually.

**2.**The first payment is received on December 31,
2018, and interest is compounded annually.

**3.**The first payment is received on December 31,
2019, and interest is compounded quarterly.

table or calculator function | ? |

Payment: | ? |

n= | ? |

i= | ? |

PV-12/31/18 |

Answer #1

Payment: | 4400 |

n= | 5 |

i= | 12% |

PV-12/31/18 | $15861.02 |

1. PVA = $4400 * 3.60478 = $15861.02

* Present value of an ordinary annuity of $1, n =5, i = 12% ( From PVA of $1)

Payment: | 4400 |

n= | 5 |

i= | 12 |

PV-12/31/18 |

2. PVA = $4400 * 4.03735 = $17764.34

* Present value of an Annuity due of $1, n =5, i = 12% ( From PVA of $1)

3.

Payment | * | PV of $1 = 3% | = | PV | n | |

First payment | $4400 | * | 0.88849 | = | 3909.35 | 4 |

Second payment | $4400 | * | 0.78941 | = | 3473.40 | 8 |

Third Payment | $4400 | * | 0.70138 | = | 3086.07 | 12 |

Fourth payment | $4400 | * | 0.62317 | = | 2741.95 | 16 |

Fifth payment | $4400 | * | 0.55368 | = | 2436.19 | 20 |

Total | 15646.97 |

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