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14. Calculate the present value of an ordinary annuity and an annuity due of a 5 year investment made by contributing $250 on

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Answer #1

Period (n) = 4*5

= 20

Interest Rate (i) =7.75%/4

= 1.9375%

Periodic Payment= $ 250

Present Value of Annuity = Periodic Payment*[{1-(1+i)^(-n)} / i]

=250*[{1-(1+1.9375%)^(-20)}/1.9375%]

= $ 4,112.62

Present Value of Annuity Due = Present Value of Annuity * ( 1+ i)

=4,112.62*(1+1.9375%)

= $ 4,192.30

Hence the correct answer is : A. $ 4,112.62, $ 4,192.30

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