Question

Exercise 6-9 Solving for unknowns; annuities [LO6-8]

For each of the following situations involving annuities, solve for the unknown. Assume that interest is compounded annually and that all annuity amounts are received at the end of each period. (i = interest rate, and n = number of years) (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.)

Present Value Annuity Amount i= n=

1. ? 3000 8% 5

2. 242980 75000 ? 4

3. 161214 20000 9% ?

4. 500000 80518 ? 8

5. 250000 ? 10% 4

Answer 1

1. PVA$3,000 (3.99271) $11,978 Present value of an ordinary annuity of $1: n-5, 1-8% (from Table 4) 2. $242,9803.23973 $75,000 Present value of an ordinary annuity of $1. П-4, 1-2 (from Table 4, i approximately 9%) 3. $161,214-8.0607 $20,000 Present value of an ordinary annuity of $1: n?,-9% (from Table 4, n approximately 15 years) 4. $500,000 6.20979 $80,518 Present value of an ordinary annuity of $1: n-8, i-? (from Table 4, i approximately 6%) 5. $250,000 $78,868 $78,8618 3.16987 Present value of an ordinary annuity of $1: n-4,-10% (from Table 4)