Question: This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $1000, calculate the present value using an annually compounded discount rate of:
a. 5%.
b. 10%.
c. 11%.
d. 15%.
Observe that the present value decreases as you increase the discount rate. However, the present value decreases proportionately less than the increase in the discount rate.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

PMT 1000 andn 20 in all parts ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Corporate Finance Questions!

The comparative unclassified statement of financial position for Puffy Ltd. follows: Additional information: 1. Net income was $115,000. 2. Sales were $978,000. 3. Cost of goods sold was $751,000. 4....

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $1,500, calculate the present value using...

value: 10.00 points This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 25 annual payments of $2600, calculate the...

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 2 0 annual payments of $ 1 , 5 0 0 , calculate the present...

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $2,100, calculate the present value using...

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $3,000, calculate the present value using...

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 2 0 annual payments of $ 2 , 4 0 0 , calculate the present...

4 This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $1,800, calculate the present value...

This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 2 0 annual payments of $ 2 , 1 0 0 , calculate the present...

Which of the following is not a characteristic of a small business? a). independently owned and operated. b). dominant in its field. c). meets certain standards in terms of size. d). all of the above.

A firm has free cash flows of $1,000, $2,000, and $3,000 at the end of years 1, 2, and 3, respectively. Assume a discount rate of 10%. If the firm has a present value of $8572.50, what is its...

When the Treasury yield curve is inverted, what is the expected path of future short term interest rates? No information about the path of future interest rates Lower expect rates to stay steady...

Calculate the value for each of Exercises. 7 3

(a) Describe the philosophy and approach of just-in-time processing. (b) Identify the major elements of JIT processing.

(a) What are the principal differences between activity based costing (ABC) and traditional product costing? (b) What assumptions must be met for ABC costing to be useful?

Dipak Co. identifies the following activities that pertain to manufacturing overhead: Materials Handling, Machine Setups, Factory Machine Maintenance, Factory Supervision, and Quality Control. For...

Over a 15-year period, Andy's investment in stock market grew in value from CAD $8,500 to CAD$19,500. During the same period, the Consumer Price Index (CPI) rose from 93.6 to 126.1. what was Andy's...

At the end of April, Cavy Company had completed Jobs 766 and 765. The individual job cost sheets reveal the following information: Job Job 765 Direct Materials Direct Labor Machine Hours Job 766...

The deferred revenue account contained a mommall account balance of $12,000, received August 1, 2022 for 6 months off snow removall service to be performed starting October 1, 2022. Dr. Cr. Question...