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Use the table below to answer the following questions: Present Value of 1 Factor Present Value...

Use the table below to answer the following questions: Present Value of 1 Factor Present Value of an Annuity of 1 Factor Period 1/2 Yr Full-Yr 1/2 Yr Full-Yr 1 0.9578 0.9174 0.9578 0.9174 2 0.9174 0.8417 1.8753 1.7591 3 0.8787 0.7722 2.7540 2.5313 4 0.8417 0.7084 3.5957 3.2397 5 0.8062 0.6499 4.4019 3.8897 6 0.7722 0.5963 5.1740 4.4859 Assumption: Required annual effective rate (EPR) of return is 9%. If an investment pays you $54,000 every 6 months for 3 years, starting at the beginning of each 6 month period, what is its present value?

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Answer #1
Formula to calculate present value of annuity due
Present value of annuity due Annuity amount + Annuity*(1-(1+r)^(-n-1))/r)
where r is interest rate and n is number of payments
Interest rate 4.50% (9%/2)
Number of payments 6 3*2
Calculation of present value of investment
Present value of investment 54000 + 54000*(1-(1.045^-5)/0.045)
Present value of investment 54000 + 54000*4.4019
Present value of investment $291,702.60
We have used the annuity factor table given, where n is 5 and annuity factor is 4.4019
Alternatively it can be solved using the formula given above
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