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    Time Value of Money

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    There are 3 parts to this; part of this has been completed
    1. Present value calculation
    2. Future value of annuity: ordinary annuity and annuity due
    3. Loan interest deductions

    1. Present value calculation:
    A PVIF  1  (1  0.02)4  ??
    B PVIF  1  (1  0.10)2  ??
    C PVIF  1  (1  0.05)3  ??
    D PVIF  1  (1  0.13)2  ??

    2. Future value of an annuity
    a. Future value of an ordinary annuity vs. annuity due
    (1) Ordinary Annuity (2) Annuity Due
    FVAk%,n  PMT(FVIFAk%,n) FVAdue  PMT[(FVIFAk%,n(1  k)]
    A FVA8%,10  $2,50014.487 FVAdue  $2,500(14.4871.08)
    FVA8%,10  $?? FVAdue  $??
    Calculator solution: ?? Calculator solution: $??
    B FVA12%,6  $5008.115 FVAdue  $500 ( 8.1151.12)
    FVA12%,6  $?? FVAdue  $??
    Calculator solution: $?? Calculator solution: $??
    C FVA20%,5  $30,0007.442 FVAdue  $30,000(7.4421.20)
    FVA20%,5  $?? FVAdue  $??
    Calculator solution: $?? Calculator solution: $??
    D FVA9%,8  $11,50011.028 FVAdue  $11,500(11.0281.09)
    FVA9%,8  $?? FVAdue  $??
    Calculator solution: $?? Calculator solution: $138,241.92
    E FVA14%,30  $6,000356.787 FVAdue  $6,000(356.7871.14)
    FVA14%,30  $?? FVAdue  $??
    Calculator solution: $?? Calculator solution: $??
    b. The annuity due results in a ???? future value in each case. By depositing the payment at the beginning rather than at the end of the year, it has ???? year of compounding.

    3. Loan interest deductions
    Challenge
    a. PMT  $10,000  (PVIFA13%,3)
    PMT  $10,000  (2.361)
    PMT  $??
    Calculator solution: $??

    b.
    End of
    Year Loan
    Payment Beginning of
    Year Principal Payments End of Year
    Principal
    Interest Principal
    1 $4,235.49 $10,000.00 $1,300.00 $2,935.49 $7,064.51
    2 4,235.49 7,064.51 918.39 3,317.10 3,747.41
    3 ?? ?? ?? ?? ??
    (The difference in the last year'

    © BrainMass Inc. brainmass.com June 3, 2020, 11:41 pm ad1c9bdddf
    https://brainmass.com/business/the-time-value-of-money/time-value-money-ordinary-annuity-annuity-due-292817

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    1. Present value calculation:
    A PVIF  1  (1  0.02)4  ?? 0.9238
    B PVIF  1  (1  0.10)2  ?? 0.8264
    C PVIF  1  (1  0.05)3  ?? 0.8638
    D PVIF  1  (1  0.13)2  ?? 0.7831

    2. Future value of an annuity
    a. Future value of an ordinary annuity vs. annuity due
    (1) Ordinary Annuity (2) Annuity Due
    FVAk%,n  PMT(FVIFAk%,n) FVAdue  PMT[(FVIFAk%,n(1  k)]
    A FVA8%,10  $2,50014.487 FVAdue  $2,500(14.4871.08)
    FVA8%,10  $?? 36,217.5 FVAdue ...

    Solution Summary

    The solution explains some calculations using time value of money.

    $2.19

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