Homework Answers
As the 5 payments are made in 15 years , we assume that the payments are done after every 3 years.
So, the present value at 4.9% rate of interest =
= 4000 + 2000/1.0493 + 2000/1.0496 + 2000/1.0499 + 2000/1.04912 + 2000/1.04915
= 4000 + 1732.62 + 1500.99 + 1300.32 + 1126.48 + 975.88
= $10636.29
So the present value of all the depositions is $10636.29.
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a. What is the amount of the annuity purchase
required if you wish to receive a fixed payment of $270,000 for 15
years? Assume that the annuity will earn 10 percent per year.
b. Calculate the annual cash flows (annuity
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annual return of 10 percent. The payments are to begin at the end
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c....
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4) PW = -$1000 + 3000(P/F,10%,3)
Single payment present (P/F, i,N)worth factor
Single payment present (P/F, i,N)worth factor
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a. What is the amount of the annuity purchase
required if you wish to receive a fixed payment of $270,000 for 15
years? Assume that the annuity will earn 10 percent per year.
b. Calculate the annual cash flows (annuity
payments) from a fixed-payment annuity if the present value of the
15-year annuity is $1.7 million and the annuity earns a guaranteed
annual return of 10 percent. The payments are to begin at the end
of the current year.
c....
2. For the cash flows shown below, determine the total equivalent present worth & the equivalent annual worth in years 1 through 5. The interest rates specified are 10% for the years 1-3 and 12% for years 4 & 5. Draw the cash flow diagram as well. (Hint: Please note the different interest rates specified for different years] (4 + 2 + 2 pts) Year 0 1 2 3 4 5 Cash Flows, S 0 2000 2000 2000 4000 4000
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