FIN200 Week 8 DQ 2

FIN200 Week 8 DQ 2 - period, 7%) by the future amount to be...

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Jean will receive $8500 per year for the next 15 years from her trust. if a 7% interest  rate is applied, what is the current value of the future payments? Describe how you  solved this problem, including which table(for example, present value and future value)  was used and why". need 150 to 300 word post Current Value of Future Payments = Payment Per period *(Present value Ordinary  factor of $1 for 15 period, 7%) (Getting Present Value Ordinary annuity factor from Present value of $1 ordinary  annuity  table) Current Value = 8500*9.10791=$77417.24 So the current value of payment to be  received by Jean over the next 15 year is  $77417.24. We solved the problem by multiplying Present value ordinary annuity factor ($1 for 15 
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Unformatted text preview: period, 7%) by the future amount to be received in each year. The table used is Present Value ordinary annuity of $1 table because this table gives us the Present value of the $1 to be received each year for a combination period and interest rate which is called present value of ordinary annuity factor. So when we multiply the relevant present value ordinary annuity factor with the payment to be received in each period we get the present value of the future amounts to be received. (For PV table refer http://www.principlesofaccounting.com/ART/fv.pv.tables/pvofordinaryannuity.htm ) Note: Its assumed the payment would be received at the end of each year that is ordinary annuity....
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This note was uploaded on 01/04/2011 for the course FIN 200 taught by Professor Williams during the Spring '08 term at University of Phoenix.

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