Finding annuity payments for present value.pptx

Finding annuity payments for present value.pptx - Finding...

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Finding annuity payments for present value Formula: A=P P=Pv of an annuity A= Annuity or periodic payment i=Periodic interest N= Total compounding periods
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A television set is being sold for 20,000 and can be bought on quarterly installment for 1 year. What is the quarterly installment payment if the interest is 10% compounded quarterly? P= 20,000 i= 2.5% N=4 A=? 20,000
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20,000 20,000(.259336) =5186.72
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For future value periodic payment Formula: A=C Example:jocelyn needs 50,000 1 year from now. If money is worth 10% compounded quarterly, how much should be deposited ate the beginning of each quarter? Solution:50,000 50,000 =50,000(.2349444) =11747.22
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Finding the term of an annuity due for present value Formula: t P=PV of an annuity due A= periodic payments i= periodic interest
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Example: PV of annuity due is 20,000 with quarterly periodic payment st beginning of a quarter of 2300 at 10% compounded quarterly. Solution: Discount factor= =8.695652(.0975610) =8.48357 Using table with i=2.55, the value 8.483565 lies between 7.97087 and 8.75206. this means that th total number of Periodic payments lies between 9 and 10.
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N=9=7.97087 n=?=8.48357 N=10=8.75206 8.48357-7.97087=.5127 8.75206-7.97087=.78119 =.65631+9 =9.65631 difference difference
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