Question

Find the payment made by the ordinary annuity with the given present value.

$252,670; quarterly payments for 30 years; interest rate is 7%, compounded quarterly

Answer 1

Information provided:

Present value= $252,670

Time= 30 years*4= 120 quarters

Interest rate= 7%/4= 1.75% per quarter

Ordinary Annuity refers to an annuity that occurs at the end of the period. The ordinary annuity payment can be computed with the help of a financial calculator in the default END mode.

Enter the below in the financial calculator in the END mode:

PV= -252,670

N= 120

I/Y= 1.75

Press the CPT key and PMT to compute the value of the ordinary annuity.

The value obtained is 5,051.67.

Therefore, the value of the ordinary annuity is $5,051.67.

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