Consider these two annuities. Annuity 1: $150 invested at the end of each 6 months for 20 years at 4.6%, compounded semi-annually. Annuity 2: $300 invested at the end of each year for 20 years at 4.6%, compounded annually. a) Calculate the total deposit, earned interest, and amount for Annuity 1. b) Calculate the total deposit, earned interest, and amount for Annuity 2. c) Which annuity earns more interest? Explain why.

Consider these two annuities. Annuity 1: $150 invested at the end of each 6 months for 20 years at 4.6%, compounded semi-annually. Annuity 2: $300 invested at the end of each year for 20 years at 4.6%, compounded annually. a) Calculate the total deposit, earned interest, and amount for Annuity 1. b) Calculate the total deposit, earned interest, and amount for Annuity 2. c) Which annuity earns more interest? Explain why.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 26P

See similar textbooks

Similar questions

Calculate the present value of the following annuities, assuming each annuity payment is made at the end of each compounding period. Annuity Payment Annual Rate Interest Compounded Period Invested 1. $4,000 7% Annually 5 years 2. 9,000 8 Semiannually 3 years 3. 3,000 8 Quarterly 2 years
In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the amount of time needed for the sinking fund to reach the given accumulated amount. (Round your answer to two decimal places.) $295 monthly at 5.8% to accumulate $25,000.
Complete the ordinary annuity. Amount of payment = $12,100 Payment Payable = Semiannually Years = 9 Interest Rate = 6%
Estimate the interest earned by an annuity for each time period. i) 2 years: _____ ii) 14 years: _____ iii) 22 years: _____
suppose that $2700 is set aside each year and invested in a savings account that pays 8% interest per year, componded continously, part a: determined the accumuluated savings in this account at teh end of 25 yrs. part b: in part a,suppose that an annuity will be withdrawn from savings that have been accumulated at the EOY 25. The annuity will extend from teh EOY 26 to EOY 33, what is the value of this annuity if teh interest rate and componding frquency in part a do not change
ind the amount accumulated FV in the given annuity account. (Assume end-of-period deposits and compounding at the same intervals as deposits. Round your answer to the nearest cent.) $200 is deposited monthly for 10 years at 6% per year in an account containing $9,000 at the start
In the provided formulas, P is the deposit made at the end of each compounding period, r is the annual interest rate of the annuity in decimal form, n is the number of compounding periods per year, and A is the value of the annuity after t years. Periodic Deposit $1500 at the end of every three months Rate 7.25% compounded quarterly Time…
If $417.00 is deposited at the end of each year for 6 years into an ordinary annuity earning 4.08% interest compound semiannually, construct a balance sheet showing the interest earning during each year and the balance at the end of each year. Assume this annuity rounds the interest and balance to the nearest penny at the end of each year.
An annuity-immediate has 28 payments of $200 per period. The effective rate of interest per period is 6% for the first 12 periods and 3% for the following 16 periods. (A) Find the accumulated value of the annuity. Round your answer to 2 decimal places. (B) Find the present value of the annuity. Round your answer to 2 decimal places.
3.) Find the present value of an annuity in perpetuity where payments are $1, 000 at the beginning of the first year, third year, etc. and payments are $1, 500 at the beginning of the second year, fourth year, etc. Here effective annual interest is 5%
Find the future value of the ordinary annuity. Interest is compounded annually, unless otherwise indicated. 6) R = $100, i = 4% interest compounded annually for 10 years
Find the present value of the ordinary annuity: Payments of $450 made annually for 13 years at 6% compounded annually. a. $ 4182.75 b. $ 3772.71 c. $3982.28 d. $ 3983.71