Jamie receives $400 on the first day of each year. Josh receives $400 on the last day of each year. Both Jamie and Josh will receive payments for the next four years. At a discount rate of 9.0 percent, what is the difference in the present value of these two sets of payments?
Josh:
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=400[1-(1.09)^-4]/0.09
=400*3.239719877
=$1295.89(Approx)
Jamie:
Present value of annuity due=Present value of annuity*(1+discount rate)
=$1295.89*1.09
=$1412.52(Approx).
Hence difference =$1412.52-1295.89
=$116.63(Approx).
Jamie receives $400 on the first day of each year. Josh receives $400 on the last...