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 $5,000 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.)

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

table or calculator function-

payment-

n=

i=

PV-12/31/2021-

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

table or calculator function-

payment-

n=

i=

PV-12/31/2021

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

Answer 1

Solution 1:
PV Factor based on
Table or Calculator function	PVA of $1
Payment	$5,000
n=	5
i=	12.00%
PV factor	3.60478
PV -12/31/2021	$18,024

Solution 2:
PV Factor based on
Table or Calculator function	PVAD of $1
Payment	$5,000
n=	5
i=	12.00%
PV factor	4.03735
PV -12/31/2021	$20,187

Solution 3:
Deposit Date	i=	n=	Deposit	PV Factor	Present Value
31-Dec-22	3.00%	4	$5,000.00	0.88849	$4,442
31-Dec-23	3.00%	8	$5,000.00	0.78941	$3,947
31-Dec-24	3.00%	12	$5,000.00	0.70138	$3,507
31-Dec-25	3.00%	16	$5,000.00	0.62317	$3,116
31-Dec-26	3.00%	20	$5,000.00	0.55368	$2,768
Total					$17,780