Question

5 Each of the following situations is independent. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of S1) (Use appropriate factor(s) from the tables provided.) Annual Number Case Present Value Annuity Future Value Interest Rate of Years А $125,000 (0) 6 B (ii) $125,000 5% C С $2,500 3% 10 $3,500 (lv) 4% 20 5 D Compute the missing amounts for () through (IV. (Round your answers to nearest hundred dollars.) 0 $ 98,750 33

Answer 1

Answer to Question
i	$1,58,164.88
ii	$97,940.77
iii	$21,965.27
iv	$46,415

Ex ;

Explanation as follows :

In this case A, you know the following

Present Value (PV) = $1,25,000

Discount Rate (R)= 4%

Number of Years (N) = 6

Calculation of Future value as follows:

FV = PV (1+R) ⁿ

FV = $1,25,000*(1 + 0.04)⁶

FV = $1,58,164.88

In this case B, you know the following

Future Value (PV) = $1,25,000

Discount Rate (R)= 5%

Number of Years (N) = 5

Calculation of present value as follows:

PV = FV / (1 + r)ⁿ

PV = $1,25,000/(1+0.05)5

PV = $97,940.77

In this case C, you know the following

The amount of each annuity payment (PMT) = $2500

Interest Rate(R) = 3%

number of periods in which payments are made (n)= 10

PV of Annuity Due = PMT * [(1 – (1 / (1 + r) ^ n))/ r] * (1 + r)

PV of Annuity Due = $2500 * [(1 – (1 / (1 + 3%)^10)) / 3%] * (1 + 3%)

PV of Annuity Due = $21,965.27

In this case D, you know the following

Periodic Payment (P) = $3500

Rate per Period (R) = 4%

Number of Periods (N) = 20

FV of Annuity Due = (1+r) * P * [((1+r)ⁿ – 1) / r ]

FV of Annuity Due = (1+ 4%) * $3500 * ((((1 + 4%)^20) – 1) / 4%)

FV of Annuity Due = $46,415