Unit 6: Lesson 2: LS Assignment 3

Alice has $20,000 in an account that pays 8% per year. Alice wants to withdraw equal amounts at the needs of the next 10 years. How much will Alice receive each year?

$2980.59

The present value interest factor for an annuity with an interest rate of 8 percent per year over 20 years is _____.

9.8181

Which of the following spreadsheet Excel functions will calculate the $614.46 present value of an ordinary annuity of $100 per year for 10 years at 10% per year?

=PV(0.10,10,-100,0,0)

An annuity due is a series of payments that are made ______.

at the beginning of each period

If the interest rate is greater than zero, the value of an annuity due is always _______ an ordinary annuity.

greater than

A perpetuity is a constant stream of cash flows for a(n) ___ period of time.

infinite

A perpetuity is a constant stream of cash flows for a(n) _______ period of time.

infinite

Which of the following are real-world examples of annuities?

mortgages leases pensions

C/r is the formula for the present value of a(n) ____.

perpetuity

the formula for the ______ value interest factor of an annuity is: [1 - 1/(1+r)^(t)]/r

present

When entering variables in an Excel function (or financial calculator) the "sign convention" can be critical to achieving a correct answer. The sign convention says that outflows are negative values; inflows prepositive values. For which variables is this a consideration?

present value future value payment

Which of the following could not be evaluated as annuities or annuities due?

tips to a waiter monthly electric bills

true or false: When calculating the present value of an annuity using the financial calculator, you enter the cash flows of the annuity in the PMT key

true

true or false: the formula for the future value an annuity factor is [(1+r)^(t) -1]/r

true

true or false: the formula for the present value interest factor for an annuity is [1 - (1/(1+r)^(t))]/r

true

The first cash flow at the end of the week 1 is $100, the second cash flow at the end of month 2 is $100, and the third cash flow at the end of year 3 is $100. This cash flow is a(n) _____ type of cash flow.

uneven

You have $2,000 right now that you lan to invest in an account paying 8% interest. You plan to add $1,000 to this account every year. Gaining next year, for 10 years. What is the future value of this investment?

$18,804.41

What is the present value of an annuity that makes payments of $100 per year for ten years if the first payment is made immediately and the discount rate is 10 percent per year.

$675.90

How much is $100 at the end of each year forever at 10 percent worth today?

1,000

Given an annuity that has a payment of $35 per year, an annual interest rate of 3%, and a present value of $130, it will last for ______ years.

4

Ralph has $1,000 in an account that pays 10 percent per year. Ralph wants to give this money to his favorite charity by making three equal donations at the end of the next 3 years. How much will Ralph give to the charity each year.

402.11 using the the PV of an annuity at 10% for 3 years

Which of the follow is a perpetuity?

a constant stream of cash flows forever

When finding the present or future value of an annuity using a spreadsheet(Excel), the _____ should be entered as a decimal.

interest rate

An ordinary annuity consists of a(n) ______ stream of cash flows for a fixed period of time.

level

The present value of an annuity due is equal to the present value of a(an) _______ annuity multiplied by (1+r).

ordinary

The present value formula for a(n) ___ is PV = C/r, where C is the constant and regally timed cash flow to infinity, and r is the interest rate.

perpetuity