Question: P5-19 For each case in the accompanying table, answer the questions that follow. a. Calculate the future value of the annuity assuming that it is

P5-19

For each case in the accompanying table, answer the questions that follow.

a.

Calculate the future value of the annuity assuming that it is

Case

Amount of Annuity

Interest rate

Deposit period

(1) Ordinary Annuity

(2) Annuity Due

A

$2,500

8%

10

B

$500

12%

6

C

$30,000

20%

5

D

$11,500

9%

8

E

$6,000

14%

30

b.

Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity - ordinary or annuity due - is preferable? Explain why.

Type answer here

P5-23

An insurance agent is trying to sell you an immediate-retirement annuity, which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low-risk investments comparable to the retirement annuity. Ignoring taxes, what is the most your would pay for this annuity?

LG 3: Personal finance: Funding your retirement

PVA = PMT

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