# 2023 5 3Future Value of an Annuity What is the future value of a

2023 5 3Future Value of an Annuity What is the future value of a

5-3Future Value of an Annuity What is the future value of a \$900 annuity payment over five years if interest rates are 8 percent? (LG5-2)

900 x [ (1+.08)^5 -1/.08]

900 x [1.5868/.08] 469.44 =

4224.96

5-5Present Value Compute the present value of a \$2,000 deposit in year 1 and another \$1,500 deposit at the end of year 3 if interest rates are 10 percent. (LG5-3)

5-7Present Value of an Annuity What’s the present value of a \$900 annuity payment over five years if interest rates are 8 percent? (LG5-4)

5-11 Present Value of an Annuity Due If the present value of an ordinary, 7-year annuity is \$6,500 and interest rates are 7.5 percent, what’s the present value of the same annuity due? (LG5-

5-15Effective Annual Rate A loan is offered with monthly payments and a 10 percent APR. What’s the loan’s effective annual rate (EAR)? (LG5-7

5-21Present Value Given a 6 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of \$1,000, \$1,200, \$1,200, and \$1,500. (LG5-3

5-39 Loan Payments You wish to buy a \$25,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments? How would the payment differ if you paid interest only? What would the consequences of such a decision be? (LG5-9)

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