Part 1: Present Value of a Series 1. Consider an ordinary annuity in which you receive...
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Part 1: Present Value of a Series 1. Consider an ordinary annuity in which you receive annual payments of $1,000 at the end of each year for the next five years. Assume the discount rate is 3%. a. Fill in the table below to calculate the present value of this stream of income payments. P.V. of payment at end of Year (1+r)" Annuity Payment year 1 2 3 4 5 P.V. of payment stream at end of 5 years b. Calculate the present value of this annuity using the shortcut formula from the notes. (Hint: your answers for part a &b should match.} 2. Calculate the present value of an ordinary annuity with annual payments of $15,000 over 20 years. Assume the discount rate is 4.5%. 1 Part 1: Present Value of a Series 1. Consider an ordinary annuity in which you receive annual payments of $1,000 at the end of each year for the next five years. Assume the discount rate is 3%. a. Fill in the table below to calculate the present value of this stream of income payments. P.V. of payment at end of Year (1+r)" Annuity Payment year 1 2 3 4 5 P.V. of payment stream at end of 5 years b. Calculate the present value of this annuity using the shortcut formula from the notes. (Hint: your answers for part a &b should match.} 2. Calculate the present value of an ordinary annuity with annual payments of $15,000 over 20 years. Assume the discount rate is 4.5%. 1
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