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[answered] 1.What is the present value of an ordinary annuity of $1 ,0


  • 1.What is the present value of an ordinary annuity of $1 ,000 per year for seven years discounted back to the present at 10 percent? What would be the present value if it were an annuity due?
  • 2.What is the future value of an ordinary annuity of $1,000 per year for seven years compounded at 10 percent? What would be the future value if it were an annuity due?
  • 3.You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year annual payments that include the principal payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments?
  • 4.What is the present value of a $1,000 perpetuity discounted back to the present at 8 percent?
  • 5.What is the present value of a $1,000 annuity for 10 years with the first payment occurring at the end of year 10 (that is, ten $1,000 payments occurring at the end of year 10 through year 19) given an appropriate discount rate of 10 percent?
  • 6.Given a 10 percent discount rate, what is the present value of a perpetuity of $1 ,000 per year if the first payment does not begin until the end of year 10 ?
  • 7.What is the annual percentage yield (APY) on an 8 percent bank loan compounded quarterly ?


1

 

Answer:

 

Given,

 

Annuity payment = $1000 P.a

 

Discount rate (i.e Interest rate ) = 10%

 

Time = 7 Years

 

Present Value of Ordinary Annuity = Annuity * PVIFA(10%, 7 years ) = $1000 * 4.86842 =

 

$4868.42...

 


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