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 an annually compounded discount rate of:(Do not round intermediate calculations and round your final answers to 2 decimal places.)

 

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.

2: A 15-year loan requires month-end payments of $647.33 including interest at 9.6% compounded monthly.

What is the balance on the loan after half of the payments have been made?(Do not round intermediate calculations and round your final answer to 2 decimal places.)

Balance on the loan?

3: Suppose Evan contributes $5,000 to his RRSP at the end of every quarter for the next 20 years, and then contributes $2,500 at each month's end for the subsequent 15 years.

How much will he have in his RRSP at the end of the 35 years? Assume that the RRSP earns 8% compounded semiannually.(Round your answer to the nearest cent.)

Future value?

4: Charlene has made contributions of $4,400 to her RRSP at the end of every half year for the past seven years. The plan has earned 10.4% compounded semiannually. She has just moved the funds to another plan earning 8.9% compounded quarterly, and will now contribute $3,400 at the end of every three months.

What total amount will she have in the plan five years from now?(Do not round intermediate calculations and round your final answer to 2 decimal places.)

Total amount? $

Answer rating: 100% (QA)

To calculate the present value PV of an ordinary annuity you can use the followi... View the full answer