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)
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