# Case Part - formula PV-OD = 100[1 –(1.1 –10 PV-OD =...

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C.) What annual interest rate would cause \$100 to grow to \$125.97 in 3 years? FV = PV (1 + i) n 125.97 = 100 (1 + i) 3 1.2597 = (1 + i) 3 = 1.079996571 = 1 + i i = 1.079996571 -1 i = .079996571 / 7.99% / 8% G.) A 5-year \$100 ordinary annuity has an annual interest rate of 10%. (1) What is its present value? PV-OD = PMT [1 – (1 + i) –n ] PV-OD = 100 [1 – (1 + .1) –5 ] PV-OD = 100 (3.79086769) PV-OD = \$379.09 (2) What would the present value be if it was a 10-year annuity? By using the same equation, we could now substitute the given information into this

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Unformatted text preview: formula: PV-OD = 100 [1 – (1 + .1) –10 ] PV-OD = 100 (6.144567106) PV-OD = \$614.46 3) What would the present value be if it was a 25-year annuity? We would still be using the same equation so we can input the following into the same formula: PV-OD = 100 [1 – (1 + .1) –25 ] PV-OD = 100 (9.077040018) PV-OD = \$907.70 (4) What would the present value be if this was a perpetuity? If we are given a perpetuity, the formula for its present value shall be this: PV-perpetuity = PMT PV-perpetuity = 100 PV-perpetuity = \$1000.00...
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Case Part - formula PV-OD = 100[1 –(1.1 –10 PV-OD =...

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