Present value of an annuity due if the present value of an


Present Value Compute the present value of a $3,000 deposit in year 2 and another $4,500 deposit at the end of year 5 using 6 percent interest rate.

1. Present Value of a Perpetuity What’s the present value a bond issued by UK Treasury with par value of 1000 pound, that promised to give investor 50 pounds per year forever, if interest rate is 4 percent?

2. Present Value of an Annuity Due If the present value of an ordinary, 10-year annuity is $10,500 and interest rate is 6.5 percent. What is the present value of the same annuity due?

3. Effective Annual Rate A loan is offered with monthly payments and an 8 percent APR. What’s the loan’s effective annual rate (EAR)?

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Financial Management: Present value of an annuity due if the present value of an
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