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Present Value of an Annuity Refer to each case in the table below to answer what are required in this problem. Find the present value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity—ordinary or annuity due—is preferable? Explain why

Present Value of an Annuity Refer to each case in the table below to answer what are required in this problem. Find the present value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity—ordinary or annuity due—is preferable? Explain why

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Problem 8: Present Value of an Annuity

Refer to each case in the table below to answer what are required in this problem.

  1. Find the present value of the annuity, assuming that it is

 (1) An ordinary annuity.

 (2) An annuity due.

  1. Compare your findings in parts a(1) and a(2). All else being identical, which type of

annuity—ordinary or annuity due—is preferable? Explain why

Case A B C D Amount of Annuity $ 12,000 55,000 700 140,000 22,500 Interest Rate 7% 12 20 5 10 Period (in years) 3 15 9 7 5
Transcribed Image Text:Case A B C D Amount of Annuity $ 12,000 55,000 700 140,000 22,500 Interest Rate 7% 12 20 5 10 Period (in years) 3 15 9 7 5
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