presentvalueofanannuitydue文件材料.ppt

Chapter 13 Annuities Due 13.2 present value of an annuity due Present value of an annuity due 0 1 2 3 4 n-1 n R R R R R P1=R P2 P5 P4 Pn P3 Method 2 0 1 2 3 4 n-1 n R R R R R R PV(n-1) PV(due)=R+ PVn-1 PV(due)=R+ PVn-1 Present value using the financial calculator functions +/- PV PMT n 1/Y FV R 0 n P BGN PV(due) CPT Application of the present-value calculation The market value of an annuity Fair market value of an annuity Present value of the annuity payments (discounted at the market rate of return) = The economic value of an annuity Current economic value of an annuity Present value of the annuity payments (discounted at a rate of return that money can earn on low-risk investments) = Example A lottery offers the winner a choice between a $300,000 cash prize or quarterly payments of $7000 beginning immediately and continuing for 20 years. Which alternative should the winner pick if money is worth 8% compounded annually? Solution: j=8% compounded annually R=$7000 i=j/m=8% term=20 years n=20*4=80 p=(1+i)c-1=1.9426547% PV PMT n 1/Y FV 7000 0 80 1.9426547 BGN -288,521.31 PV(due)=288,521.31$300,000 CPT Example Mayfair Furniture is advertising a chesterfield and reclining chair combination for $131.83 down and 11 monthly payments of $131.83, including interest at 15% compounded annually. What is the ticket or cash price of the set? Step 1: calculate the present value of all payments are made during the first 5 years j=8% compounded quarterly i=8%/4=2% p=(1+i)c-1=4.04% R=$1000 n=5*2=10 PV PMT n 1/Y FV 1000 0 10 4.04 BGN -8421.80 CPT Step 2:calculate the present value of all payments made during the subsequent