(a) State some examples of annuities. (4marks) (b) Calculate the following present value of annuities: ...
(a) State some examples of annuities. (4marks)
(b) Calculate the following present value of annuities:
(i) RM2,500 a year for 10 years discounted back to the present at 7%. (3 marks)
(ii) RM70 a year for 3 years discounted back to the present at 3% (3 marks)
Homework Answers
a)1)
| Examples of Annuities |
| 1.Life Insurance premiums |
| 2.Recurring deposit schemes |
| 3.Monthly pension schemes |
| 4.Mortgage Payments |
b)i)
| Present Value of Annuity RM 2500 for 10 years @7% |
| Present Value of RM 1 for 10 years @7%=7.024(As per Annuity Table) |
| Present Value of Annuity RM 2500=2500*7.024 |
| =2500*7.024 |
| =17560 |
b)ii)
| Present Value of Annuity RM 70 for 3 years @3% |
| Present Value of RM 1 for 3 years @3%=2.829(As per Annuity Table) |
| Present Value of Annuity RM 70=70*2.829 |
| =70*2.829 |
| =198.03 |
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