Question

Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2021, of a five-period annual annuity of $5,900 under each of the following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

The first payment is received on December 31, 2022, and interest is compounded annually.

The first payment is received on December 31, 2021, and interest is compounded annually.

The first payment is received on December 31, 2022, and interest is compounded quarterly.

	Table or calculator function: Payment: n = i = PV - 12/31/2021:

	Deposit Date i = n = Deposit PV - 12/31/2021 12/31/2022 $5,900 12/31/2023 5,900 12/31/2024 5,900 12/31/2025 5,900 12/31/2026 5,900 $0

Answer 1

Annual Payment = $5,900

Answer 1.

Annual Interest Rate = 12%

Present Value = $5,900 * PVA of $1 (12%, 5)
Present Value = $5,900 * 3.60478
Present Value = $21,268.20

Answer 2.

Annual Interest Rate = 12%

Present Value = $5,900 * PVAD of $1 (12%, 5)
Present Value = $5,900 * 4.03735
Present Value = $23,820.36

Answer 3.

Annual Interest Rate = 12%
Quarterly Interest Rate = 3%

Present Value = $5,900*PV of $1(3%, 4) + $5,900*PV of $1(3%, 8) + $5,900*PV of $1(3%, 12) + $5,900*PV of $1(3%, 16) + $5,900*PV of $1(3%, 16)
Present Value = $5,900*0.88849 + $5,900*0.78941 + $5,900*0.70138 + $5,900*0.62317 + $5,900*0.55368
Present Value = $20981.167