Question 1: Option 2 is the correct answer
The present value of annuity is the discounted value of all the cash flows of a particular investment or the security, when the payment is made at the beginning value then the present value is higher as the discounting for the period is not done for a particular period and the higher value ( amount of payment ) will lead to higher present value.
Question 2: Present value if annuity = Payment * [ 1 - ((1+r)^-n) / r * ( 1 +r)]
Where, r is interest rate per period
n is number oif period.
14205.32 = P * [ 1 - (1 + 11%)^-4] / 0.11 * (1 + 11%)
14205.32 = P * [ 1 - (1.11)^-4] / 0.11 * (1 + 11%)
14205.32= P * [ 1 - 0.658730] / 0.11 * (1 + 11%)
14205.32 = P * 3.102445 * 1.11
P = 14205.32 / 3.44371471545
P = 4124.999 or 4125 [Rounded off]
Payment = 4125
Question 3: Jackpot amount = $85,000,000
periodic payment = Jackpot amount / Number of payment
= 85,000,000 / 4
= 21250000
Present Value of annuity due = P * [ 1 - (1+r)^-n] / r * (1 +r)
= 21250000 * [ 1 - (1+11%)^-4] / 4% * ( 1 + 11%)
= 21250000 * [ 1 - 0.658730974] / 0.11 * (1.11)
= 21250000 * 3.102445 * 1.11
= $731,789,21.4375
Actual Lottery Amount = $731,789,21.4375
7. Present value of annuities and annuity payments Aa Aa The present value of an annuity...
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six mońths O An annuity that pays $1,000 at the...
9. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the beginning of every six months O An annuity that pays $500 at the...
You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $1,000 at the end of each year O An annuity that pays $500 at the end of every six months O An annuity that pays $1,000 at the beginning of each year O An annuity that pays $500 at the beginning of every six months...
7. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year...
The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. bevinning of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays...
8. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the areatest present value (pV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $1,000 at the end of each year O An annuity that pays $1,000 at the beginning of each...
An ordinary annuity selling at $9,697.45 today promises to make equal payments at the end of each year for the next eight years (N). If the annuity's appropriate interest rate (1) remains at 8.00% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $85,000,000, paid in eight equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won assuming an...
You just won the lottery. Congratulations! The jackpot is $35,000,000, paid in four equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won _________- assuming an annual interest of 6.50%.
You are comparing two annuities which offer annual payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first day of each year (i.e., the first payment will occur today) while annuity B pays on the last day of each year (i.e., the first payment will occur a year from today). Which one of the following statements is correct concerning these two annuities? Multiple Choice Both annuities are of equal...
The following table describes the characteristics of five annuities: E. Calculate the future value of each annuity given its characteristics. The future value, FV, on the annuity at the end of the deposit period for Deposit A is $ . (Round to the nearest cent.) i Data Table 4% Annual Annuity Interest Annuity Deposit Payment Rate Length (yr) $2,200 $800 6% $1,300 8% $12,400 9% $4,100 15% (Click on the icon located on the top-right corner of the data table...