Question:
For each of the following situations involving annuities, solve for the unknown (?). Assume that interest
is compounded annually and that all annuity amounts are received at the end of each period. ( i = interest
rate, and n = number of years)
Answer:
1. PVA = $3,000 (3.99271) = $11,978
Present value of an ordinary annuity of $1: n = 5, i = 8% (from Table 4)
2. $242,980 = 3.23973
$75,000
Present value of an ordinary annuity of $1: n = 4, i = ? (from Table 4, i =
approximately 9%)
3. $161,214 = 8.0607
$20,000
Present value of an ordinary annuity of $1: n = ?, i = 9% (from Table 4, n =
approximately 15 years)
4. $500,000 = 6.20979
For each of the following situations involving annuities, solve for the unknown (?). Assume that interest
is compounded annually and that all annuity amounts are received at the end of each period. ( i = interest
rate, and n = number of years)
Answer:
1. PVA = $3,000 (3.99271) = $11,978
Present value of an ordinary annuity of $1: n = 5, i = 8% (from Table 4)
2. $242,980 = 3.23973
$75,000
Present value of an ordinary annuity of $1: n = 4, i = ? (from Table 4, i =
approximately 9%)
3. $161,214 = 8.0607
$20,000
Present value of an ordinary annuity of $1: n = ?, i = 9% (from Table 4, n =
approximately 15 years)
4. $500,000 = 6.20979
