Purchase Solution

# Present Value of Annuity Streams

Not what you're looking for?

How would you calculate the present and future value of the following annuity streams?

a. \$5,000 received each year for 5 years on the last day of each year if your investments pay 6 percent compounded annually.

b. \$5,000 received each quarter for 5 years on the last day of each quarter if your investments pay 6 percent compounded quarterly.

c. \$5,000 received each year for 5 years on the first day of each year if your investments pay 6 percent compounded annually.

d. \$5,000 received each quarter for 5 years on the first day of each quarter if your investments pay 6 percent compounded quarterly.

##### Solution Summary

This solution calculates both the present and future values for the identified annuity streams. Excel is used for future value calculations. Inputs for present value calculations are identified and can be easily plugged in to a financial calculator. Adjustments for PV of an annuity in advance from an annuity in arrears are calculated as well.

##### Solution Preview

Thank you for asking BrainMass. Here you go:

a. \$5,000 received each year for 5 years on the last day of each year if your investments pay 6 percent compounded annually.
Cash Flow Stream: Annuity
Type of annuity: Arrears
Annual cash flow C= \$5,000
Number of years t = 5 years
Frequency of compounding in a year f= 1
Annual Interest rate R= 6%
Interest rate for compouding period r = R/f=6%/1=6%
PV of an annuity in arrears=C/r*(1-1/(1+r)^(f*t))= 5000/6%*(1-1/(1+6%)^(1*5))=\$21061.82

b. \$5,000 received each quarter for 5 years on the last day of each quarter if your investments pay 6 percent compounded quarterly.
Cash Flow Stream: ...

##### Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

##### Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

##### Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

##### Motivation

This tests some key elements of major motivation theories.

##### Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.