# P4-18 Work - Solution-Please Press F2 to see the...

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Question:- Problem P4-18 Future Value of annuity For each case in the accompanying table, answ 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. Solution: - Computation of the Future Value An ordinary annuity. = 1/i * [(1+i)^ - 1] FVA (due) = FV (ordinary annuity) * (1+r) Case Amount Rate Period Ordinary Annuity A \$2,500 0.08 10 \$36,216.41 B \$500 0.12 6 \$4,057.59 C \$30,000 0.2 5 \$223,248.00 D \$11,500 0.09 8 \$126,827.45 E \$6,000 0.14 30 \$2,140,721.08 b. Compare your finding in parts a (1) and a (2). All else being identical, which type of annu ordinary or annuity due – is preferable? Explain why?

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Unformatted text preview: Solution: -Please Press F2 to see the Calculations Ordinary annuity are payments made at the end of every year while annuity due is payme the year. In all the above answers, first one is ordinary annuity and second one is annuity higher future value as compared to ordinary, however it also means initial payment needs against one year later for ordinary annuity wer the question that follow. Annuity due \$39,113.72 \$4,544.51 \$267,897.60 \$138,241.92 \$2,440,422.03 uity – nt made at the beginning of due. Annuity due gives a s to be made right away as...
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