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Question 1:
Score 0.5/1
Your response
Correct response
Calculating Annuity Values
If you deposit $1,900 at 8.5 percent interest at the end of each of the next 21 years you will have
$
91916.33
(0%) in the account. If you make deposits for 42 years, you will have $
665322.76
(50%) in
the account at the end of 42 years.
(Round your answers to 2 decimal places. Omit the "$" sign in your
response.)
Calculating Annuity Values
If you deposit $1,900 at 8.5 percent interest at the end of each of the next 21 years you will have
$
101,629.21 with a tolerance of ± 0.1%
in the account. If you make deposits for 42 years, you will
have $
665322.76
in the account at the end of 42 years.
(Round your answers to 2 decimal places. Omit
the "$" sign in your response.)
Total grade:
0.0×1/2 + 1.0×1/2 = 0% + 50%
Feedback:
Here we need to find the FVA. The equation to find the FVA is:
FVA =
C
{[(1 +
r)
t
– 1] /
r
}
FVA for 21 years =$1,900[(1.085
21
– 1) / 0.085]
FVA for 21 years = $101,629.21
FVA for 42 years =$1,900[(1.085
42
– 1) / 0.085]
FVA for 42 years = $665,322.76
Question 2:
Score 0/1
Your response
Correct response
Calculating Annuity Present Value
An investment offers $3,500 per year for 20 years, with the first payment occurring 1 year from now. If the required
return is 8 percent, the value of the investment is $
(0%). The value of the investment would be $
(0%) if
the payments occurred for 35 years. The value of the investment would be $
(0%) if the payments occurred for
79 years. The value of the investment would be $
(0%) if the payments occurred forever.
(Round your
answers to 2 decimal places. Omit the "$" sign in your response.)
Calculating Annuity Present Value
An investment offers $3,500 per year for 20 years, with the first payment occurring 1 year from now. If the required
return is 8 percent, the value of the investment is $
34,363.52 with a tolerance of ± 0.1%
. The value of
the investment would be $
40,790.99 with a tolerance of ± 0.1%
if the payments occurred for 35 years.
The value of the investment would be $
43,649.88 with a tolerance of ± 0.1%
if the payments occurred
for 79 years. The value of the investment would be $
43,750 with a tolerance of ± 0.1%
if the payments
occurred forever.
(Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Total grade:
0.0×1/4 + 0.0×1/4 + 0.0×1/4 + 0.0×1/4 = 0% + 0% + 0% + 0%
Feedback:
To find the PVA, we use the equation:
PVA =
C
({1 – [1/(1 +
r)
]
t
} /
r
)
[email protected] yrs: PVA = $3,500{[1 – (1/1.08)
20
] / 0.08} = $34,363.52
[email protected] yrs: PVA = $3,500{[1 – (1/1.08)
35
] / 0.08} = $40,790.99
[email protected] yrs: PVA = $3,500{[1 – (1/1.08)
79
] / 0.08} = $43,649.88
To find the PV of a perpetuity, we use the equation:
PV =
C
/
r
PV = $3,500 / 0.08
PV = $43,750.00
Notice that as the length of the annuity payments increases, the present value of the annuity approaches the
present value of the perpetuity. The present value of the 79year annuity and the present value of the perpetuity
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This note was uploaded on 10/10/2010 for the course FIN 301 taught by Professor Andelin,stevenle during the Spring '07 term at Pennsylvania State University, University Park.
 Spring '07
 ANDELIN,STEVENLE
 Annuity, Interest

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