Question

4:07 ! 0.29 K/s 0.77 23% – 't November 29, 2019 Question 2 Not complete Marked out of 5.00 P Flag Instruction: Fill in the blanks. Do not use thousand seperator, use 2 decimal places only Which among the following (simple) annuities will you choose based on the future value? Option 1 Option 2 Option 3 Option 4 500 515 475 450 rate per annum 10.00% 5.00% 15.00% 20.00% payments per year 12 t(years) Question 12 The best option is option Check Previous page GA CH26.ppt - - Analou Tubio 5. offer letter pdf Type here to search o Delete Share

Answer 1

Firstly we need ti find the future value of every option

We use financial calculator to find the future value

Option A : Given

m( period in a year) = 12

n = 2

Inputs in calculator: pmt = 500 , I/Y = 10% / 12 = 0.8333 ,

N = n×m = 24 , pv = 0 , Fv = compute

We get, future value = 13223.46

Option 2

Inputs : pmt = 515 , I/Y = 5% / 12 = 0.4167 , n = 24 ,

Pv = 0 , Fv = compute

We get, Future value = 12970.80

Option 3

Inputs : pmt= 475. , I/Y = 15%/12 = 1.25. , n = 24

PV =0. , Fv = compute

We get, Future value = 13199.34

Option 4

Inputs : pmt = 450. , I/Y = 20% /12 = 1.667 , n = 24 ,

pv = 0. , future value = compute

We get, future value = 13147.22

On the basis of future value we choose Option A .