PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary

annuities. Discounting occurs once a year

a. $400 per year for 10 years at 10%

0 1 2 3 4 5 6 7 8 9 10
| | | | | | | | | | |
PV = ? 400 400 400 400 400 400 400 400 400 400

With a financial calculator, simply enter the known values and then press the key
for the unknown. Enter: N = 10, I = 10, PMT = -400, and FV = 0. PV =
$2,457.83.

b. $200 per year for 5 years at 5%

| | | | | |
PV = ? 200 200 200 200 200

With a financial calculator, enter: N = 5, I = 5, PMT = -200, and FV = 0. PV

= $865.90.

c. $400 per year for 5 years at 0%

0 1 2 3 4 5
| | | | | |
PV = ? 400 400 400 400 400

With a financial calculator, enter: N = 5, I = 0, PMT = -400, and FV = 0. PV

= $2,000.00.

d. Rework Parts a, b, and c assuming they are annuities due

d. 1. 0 10%
1 2 3 4 5 6 7 8 9 10
| | | | | | | | | | |
400 400 400 400 400 400 400 400 400 400
PV = ?

With a financial calculator on BEG, enter: N = 10, I = 10, PMT = -400,

and FV = 0. PV = $2,703.61.
2. 0 5% 1 2 3 4 5
| | | | | |
 200 200 200 200 200
PV = ?
With a financial calculator on BEG, enter: N = 5, I = 5, PMT =
-200, and FV = 0. PV = $909.19.
3. 0 0% 1 2 3 4 5
| | | | | |
400 400 400 400 400
PV = ?

With a financial calculator on BEG, enter: N = 5, I = 0, PMT =

-400, and FV = 0. PV = $2,000.00.