Question

1. Calculate the PV of an annuity due if the periodic cash flow = $9,200, the time frame = 5 years and the annual interest rate = 8%.

2. Calculate the PV of an ordinary annuity if the periodic cash flow = $11,000, the time frame = 4 years, and the annual interest rate = 10%.

3. Mary intends to invest $15,000 each year for 6 years at an expected interest rate of 7% per year. If Mary invests monthly, then Mary intends to invest $_______ each month for ____ months at an expected interest rate or _____% per month.

4. Calculate the periodic cash flow of an ordinary annuity if the PV = $220,000, the time frame = 10 years and the interest rate = 6%.

Answer 1

1-	Year	cash flow	present value of cash flow = cash flow/(1+r)^n r= 8%
	0	9200	9200
	1	9200	8518.518519
	2	9200	7887.517147
	3	9200	7303.256617
	4	9200	6762.274646
	present value of annuity due	sum of present value of cash flow	39671.56693
2-	Year	cash flow	present value of cash flow = cash flow/(1+r)^n r= 8%
	1	11000	10185.18519
	2	11000	9430.727023
	3	11000	8732.154651
	4	11000	8085.328381
	present value of ordinary annuity	sum of present value of cash flow	36433.39524
3-	Monthly payment = 15000/12 = 1250    period = 12*6 = 72 rate = 7%/12 = .5833%
4-	Periodic cash flow = using PMT function in MS excel =pmt(rate,nper,PV,FV,type)	PMT(6%,10,-220000,0,0)	$29,890.95