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4. P5-20: Present value of an annuity: Amou In Cas nt of terest e annuity rate Period (years) A $12,000 7% B 55,000 12 C 700 20 D 140,000 5 E 22,500

4. P5-20: Present value of an annuity:
Case Amount of annuity Interest rate Period (years)
A $12,000 7% 3
B 55,000 12 15
C 700 20 9
D 140,000 5 7
E 22,500 10 5

a. Calculate the present value of the annuity assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity-ordinary or annuity due-is preferable? Explain why.
4. P5-20: Present value of an annuity : Cas e Amou nt of annuity In terest rate Period (years) A $12,000 7% 3 B 55,000 12 15 C 700 20 9 D 140,000 5 7 E 22,500 10 5 a. Calculate the present value of the annuity assuming that it is (1) An ordinary annuity. (2) An annuity due. b. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity- ordinary or annuity due-is preferable? Explain why.
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Finance-8200150.xls

4. P5-20: Present value of an annuity:
Case
Amount of annuity
Interest rate
A
$12,000
7%
B
55,000
12%
C
700
20%
D
140,000
5%
E
22,500
10% a) b) Period (years)
3
15
9
7
5 a. Calculate the present...

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