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fin3331 021402 tvm annuity jesse

fin3331 021402 tvm annuity jesse - This is how much it...

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Fin3331.0219a fin3331.1002a fin3331.0214c Annuities How much would you need earning 7 percent, to collect \$ 100 per year for 5 years? Method 1: The Jesse James Method. Compute the value of the perpetuity, and subtract out the present value that Jesse James rides off with, 5 years later. Perrpetuity = 1428.57 Perpetuity delayed 5 years = 1428.57(.7130) =1018.57 PV of 5 year annuity = 1428.57 – 1018.57 = 410.00 Method 2: Discount each of the 5 payments separately, and add up the present values. PV = + ) 07 . 1 ( 100 + 2 ) 07 . 1 ( 100 + 3 ) 07 . 1 ( 100 + 4 ) 07 . 1 ( 100 5 ) 07 . 1 ( 100 PV = + 46 . 93 + 34 . 87 + 63 . 81 + 29 . 76 30 . 71 PV = 410.02 Method 3: Use of Tables Look up PVIFA for 7 percent, 5 years PVIFA = 4.1002

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Unformatted text preview: This is how much it would take to produce an income of 1.00 each year, for 5 years PV = 100 * 4.1002 = 410.02 Method 4: Use of financial calculator N= 5 PMT = 100 FV=0 I=7 CPT PV = -410.02 Note: This amount is less than 1,428.57 because we are not going to collect forever. We are only going to collect for 5 years. Note: This amount is less than 500, because the 5 payments are delayed from 1 to 5 years. Quiz: What is the present value of n equal annual payments of x each, if the first payment is to be received at the end of the year and if the discount rate is 15 percent?...
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