Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Present value of an annuity Consider the following cases.
Case
◄AUA-
E
Amount of annuity
$ 12.000
55.000
700
140.000
22.500
Interest rate
12
20
5
10
Period (years)
a. Calculate the present value of the annuity assuming that it is
(1) An ordinary annuity,
mu
9
7
b. Compare your findings in parts al 1) and a(2). All else being identical, which
of annuity-ordinary or annuity due-is preferable? Explain why.
Personal Finance Problem
Tume value-Annuities - Marian Kirk wishes to select the better of two 10-year
annuines, C and D. Annuity C is an ordinary annuity of $2,500 per year for
10 years. Annuity D is an annuity due of $2,200 per year for 10 years.
delen future value of both annuities at the end of year 10, assuming that
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