Question

LG 4-20 Ordinary annuity versus annuity due Marian Kirk wishes to select the better of two 10-year annuities, C and D. Annuity C is an ordinary annuity of $2,500 per year for 10 years. Annuity D is an annuity due of $2,200 per year for 10 years. a. Find the future value of both annuities at the end of year 10, assuming that Marian can earn (1) 10% annual interest and (2) 20% annual interest. b. Use your findings in part a to indicate which annuity has the greater future value at the end of year 10 for both the (1) 10% and (2) 20% interest rates. c. Find the present value of both annuities, assuming that Marian can earn (1) 10% annual interest and (2) 20% annual interest. d. Use your findings in part c to indicate which annuity has the greater present value for both (1) 10% and (2) 20% interest rates. e. Briefly compare, contrast, and explain any differences between your findings using the 10% and 20% interest rates in parts b and d.

Answer 1

As per rules I am answering the first 4 subparts of the question

	Annuity	C	D	Greater
1	Fv at 10% Interest	$39,843.56	$38,568.57	C
2	Fv at 20% Interest	$64,896.71	$68,530.92	D
3	PV at 10%	$15,361.42	$14,869.85	C
4	PV at 20%	$10,481.18	$11,068.13	D

Workings

AutoSave o 9.3HD Book1 - Excel Sign in - 0 X File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do Share Comments - 11 A = = 0 insert E 48 O Calibri BIU - B -A A = E Paste L- - General 3$ -% Number Conditional Format as Formatting Table - . Delete - Format Cell Styles Sort & Find & Filter - Select Editing Clipboard Font Alignment Styles Cells 21 3 2 Annuity Fv at 10% Interest Fv at 20% Interest PV at 10% PV at 20% =FV(10%,10,-2500) =FV(20%,10,-2500) =PV(10%, 10,-2500) =PV(20%,10,-2500) =FV(10%,10,-2200,,1) =FV(20%,10,-2200,,1) =PV(10%,10,-2200,,1) =PV(20%,10,-2200,,1) Greater C D C D Sheet1 Sheet2 Sheet3 Ready 3 E ^ O d -- ENG 5:07 AM + 100% 0

Answer 2

As per rules I am answering the first 4 subparts of the question Annuity C D Greater 1 Fv at 10% Interest $39,843.56 $38,568.57 C 2 Fv at 20% Interest $64,896.71 $68,530.92 D 3 PV at 10% $15,361.42 $14,869.85 C 4 PV at 20% $10,481.18 $11,068.13 D

Answer 3

As per rules I am answering the first 4 subparts of the question Annuity C D Greater 1 Fv at 10% Interest $39,843.56 $38,568.57 C 2 Fv at 20% Interest $64,896.71 $68,530.92 D 3 PV at 10% $15,361.42 $14,869.85 C 4 PV at 20% $10,481.18 $11,068.13 D

Answer 4

As per rules I am answering the first 4 subparts of the question Annuity C D Greater 1 Fv at 10% Interest $39,843.56 $38,568.57 C 2 Fv at 20% Interest $64,896.71 $68,530.92 D 3 PV at 10% $15,361.42 $14,869.85 C 4 PV at 20% $10,481.18 $11,068.13 D

Answer 5

As per rules I am answering the first 4 subparts of the question Annuity C D Greater 1 Fv at 10% Interest $39,843.56 $38,568.57 C 2 Fv at 20% Interest $64,896.71 $68,530.92 D 3 PV at 10% $15,361.42 $14,869.85 C 4 PV at 20% $10,481.18 $11,068.13 D