1. The figure shows a graph that compares the present values of two ordinary annuities of $800...

Question:

1. The figure shows a graph that compares the present values of two ordinary annuities of $800 quarterly, one at 6% compounded quarterly and one at 9% compounded quarterly.

(a) Determine which graph corresponds to the 6% rate and which to the 9% rate.

(b) Use the graph to estimate the difference between the present values of these annuities for 25 years (100 quarters).

50,000 40,000 30,000 + 20,000 10,000 time 25 50 75 100 125 Quarters Dollars

2. Explain the difference between an ordinary annuity and an annuity due?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...