Present value of an annuity Consider the following case. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Amount of annuity Interest rate $42,000 7% a. Calculate 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. Period (years) 14

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
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Present value of an annuity Consider the following case. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)
Interest rate
Period (years)
7%
14
Amount of annuity
$42,000
a. Calculate the present value of the annuity assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. 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.
The present value of the ordinary annuity is $. (Round to the nearest cent.)
(…)
Transcribed Image Text:Present value of an annuity Consider the following case. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Interest rate Period (years) 7% 14 Amount of annuity $42,000 a. Calculate the present value of the annuity assuming that it is (1) An ordinary annuity. (2) An annuity due. b. 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. The present value of the ordinary annuity is $. (Round to the nearest cent.) (…)
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