Whats the present value of a $810 annuity payment over four years if interest rates are 8 percent?

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Whats the present value of a $810 annuity payment over four years if interest rates are 8 percent?

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Future value basics

The future value formula is used to determine the value of a given asset or amount of cash in the future, allowing for different interest rates and periods.

For example, this formula may be used to calculate how much money will be in a savings account at a given point in time given a specified interest rate. The effects of compound interest—with compounding periods ranging from daily to annually—may also be included in the formula. Plots are automatically generated to show at a glance how the future value of money could be affected by changes in interest rate, interest period or desired future value.

i) What is the present value of $810 annuity payment over 4 years if interest rate is 8%? (Round

to 2 decimal places)

Answer:

Given that,

Annuity, A = $810

Period, n = 4

Interest Rate, i = 8%

Present Value, PV =?

We know that PV = (A/i) [1-{1/ (1+i)

n

}]

= ($810/.08) [1- {1/ (1.08)

4

}]

= $2682.82

ii) Compute the future value in a year of $3,500 deposit in year 1 and another 3,000 deposit at

the end of year 3 using a 10% interest rate. (Round to 2 decimal places)

Answer:

Here one deposit is made in year 1 and another deposit is made in year 3. Assuming

deposits are made at the end of the year and total investment horizon is 5 years, Future value is

calculated below.

We know that, FV = PV (1+i)

n

So, FV of deposit made in at the end of Year 1 = $3500 (1+0.1)

4

= $5124.35

FV of deposit made in at the end of Year 3 = $3000 (1+0.1)

2

= $3630

So, total future value of the investment after 5 years = $5124.35 + $3630

= $8754.35

(Investment horizon 5 year assumed since there is no time horizon given)

iii) One year treasury bills currently earn 2.80 percent. you expect I year from now a 1 year

treasury bill rate to increase to 3.00 percent and that two year from now, 1 year treasury bill rates

will I increase 3.50 percent. The liquidity premium on a 2 year security is 0.10 percent and on3-

year securities are 0.20 percent. If the liquidity premium theory is correct what should the current

rate be on 3-year treasury securities? (Round to 2 decimal places)

Answer:

According to Liquidity premium theory, Current rate of three year Treasury bill;

(2.8%+3%+3.5%)/3 + 0.2%

= 3.30%

What's the present value of a $600 annuity payment over five years if interest rates are 9 percent?

Answer and Explanation: The calculated present value of the annuity is $2,333.79.

What is the formula in finding the present value of a deferred annuity identify each variable represents?

The formula for determining the present value of an annuity is PV = dollar amount of an individual annuity payment multiplied by P = PMT * [1 – [ (1 / 1+r)^n] / r] where: P = Present value of your annuity stream.

What is the sum of present value of all the payments to be made during the entire term of the annuity?

The present value of an annuity is the total cash value of all of your future annuity payments, given a determined rate of return or discount rate. Knowing the present value of an annuity can help you figure out exactly how much value you have left in the annuity you purchased.

How do you calculate annuity due?

What is the Annuity Due Formula?.
Annuity Formula = r * PVA / [{1 – (1 + r)n} * (1 + r)].
Present Value of Annuity Due = Pmt x [ (1 – 1/(1+r)n) / r ] * (1 + r).
Future Value of Annuity Due = Pmt * [(1 + r)n – 1] * (1 + r) / r..