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Unformatted text preview: For each case in the accompanying table, answer the question that follow. Case Amount Rate Period A 2500 8 10 B 500 12 6 C 30000 20 5 D 11500 9 8 E 6000 14 30 a. Calculate the future value of the annuity assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your finding in parts a (1) and a (2). All else being identical, which type of annuity – ordinary or annuity due – is preferable? Explain why? (A.) An ordinary annuity. 1/i * [(1+i)^  1] FVA (due) = FV (ordinary annuity) * (1+i) Case Amount Rate Period Ordinary Annuity Annuity due A $2,500 0.08 10 $36,216.41 $39,113.72 B $500 0.12 6 $4,057.59 $4,544.51 C $30,000 0.2 5 $223,248.00 $267,897.60 D $11,500 0.09 8 $126,827.45 $138,241.92 E $6,000 0.14 30 $2,140,721.08 $2,440,422.03 (B.) year later for ordinary annuity....
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This note was uploaded on 04/22/2011 for the course FIN & ACC 504 & 502 taught by Professor Harper&tai during the Spring '11 term at Grand Canyon.
 Spring '11
 Harper&Tai

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