PS1_Solution

PS1_Solution - PS1_Solution (1) a. 0 | 10% 1 | 2 | 3 | 4 |...

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PS1_Solution (1) a. 0 1 2 3 4 5 6 7 8 9 10 | | | | | | | | | | | 400 400 400 400 400 400 400 400 400 400 FV = ? FV (Ordinary Annuity) =P* ( ( (1+i)^n ) -1 ) /i= 400*( ( (1+10%)^10 )-1) /10%= $6,374.96. With a financial calculator, enter N = 10, I = 10, PV = 0, and PMT = 400. Then press the FV key to find FV = $6,374.97. b. 0 1 2 3 4 5 6 7 8 9 10 | | | | | | | | | | | 400 400 400 400 400 400 400 400 400 400 FV = ? FV (Annuity Due) = FV (Ordinary Annuity)*(1+i) = $6,374.97*(1+10%) = $7,012.47. You could use a financial calculator here as well. Just set the calculator for beginning of period payment. (2) a. 0 1 2 3 4 5 6 7 8 9 10 | | | | | | | | | | | PV = ? 400 400 400 400 400 400 400 400 400 400 PV (OA) =P*[ ( 1-1/ ( (1+i)^n ) ) /i] = 400*[(1-1/((1+10%)^10))/10%] =$2,457.83. You could also use a financial calculator as in part a. With a financial calculator, enter N = 10, I = 10, FV = 0, and PMT = 400. Then press the PV. b.
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PS1_Solution - PS1_Solution (1) a. 0 | 10% 1 | 2 | 3 | 4 |...

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