Math Problem Statement

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 Period​ (years) ​$13 comma 000 9​% 5

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 annuitylong dashordinary or annuity duelong dashis ​preferable? Explain why. Question content area bottom Part 1 The present value of the ordinary annuity is ​$

enter your response here.  ​(Round to the nearest​ cent.) 13,000 9 5

Solution

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Math Problem Analysis

Mathematical Concepts

Present Value
Ordinary Annuity
Annuity Due
Time Value of Money

Formulas

Present Value of Ordinary Annuity: PV_Ordinary = P × (1 - (1 + r)^(-n)) / r
Present Value of Annuity Due: PV_AnnuityDue = PV_Ordinary × (1 + r)

Theorems

Time Value of Money

Suitable Grade Level

College level (Finance, Business Studies)