Build a model to calculate the present value of receiving a compound annuity. The first annuity...

 

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Build a model to calculate the present value of receiving a compound annuity. The first annuity pays 5 cash flows of $130 starting in year 1. The second annuity pays 17 growing cash flows starting at $130 in year 6. The second annuity's cash flows grow by 3%. Assume a discount rate of 5%. The first annuity's term will always be 5 years, but the second annuity's term can change. Allow your model to accommodate up to 25 total periods. Use your model to answer the following questions: What is the present value (time 0) of the first annuity's cash flows? What is the present value (time 0) of all cash flows? What is the present value (time 0) of the second annuity's cash flows? What is the time 5 value of the second annuity's cash flows? Year Cash Flow Discount Rate 2nd Annuity Periods 2nd Annuity Growth Rate Cash Flow PV of $1 Your answer $732.81 PV of Cash Flow $130 5% 17 3% Correct Answer $562.83 $1,983.08 $1,420.25 $1,812.64 Build a model to calculate the present value of receiving a compound annuity. The first annuity pays 5 cash flows of $130 starting in year 1. The second annuity pays 17 growing cash flows starting at $130 in year 6. The second annuity's cash flows grow by 3%. Assume a discount rate of 5%. The first annuity's term will always be 5 years, but the second annuity's term can change. Allow your model to accommodate up to 25 total periods. Use your model to answer the following questions: What is the present value (time 0) of the first annuity's cash flows? What is the present value (time 0) of all cash flows? What is the present value (time 0) of the second annuity's cash flows? What is the time 5 value of the second annuity's cash flows? Year Cash Flow Discount Rate 2nd Annuity Periods 2nd Annuity Growth Rate Cash Flow PV of $1 Your answer $732.81 PV of Cash Flow $130 5% 17 3% Correct Answer $562.83 $1,983.08 $1,420.25 $1,812.64

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To calculate the present value of receiving a compound annuity we can use the formula for the presen... View the full answer