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Basic Question 7 of 27
What is the present value of the following annuity due?
Payment frequency = annual, at the beginning of each year
Number of payments = 20
Interest rate = 8% per year
B. $1,060.36
C. $1,145.19
Payment amount = $100
Payment frequency = annual, at the beginning of each year
Number of payments = 20
Interest rate = 8% per year
A. $981.81
B. $1,060.36
C. $1,145.19
User Contributed Comments 13
| User | Comment |
|---|---|
| Laurel | When you subtract 1 from 1 you get 0 which makes everthing on that side of the equation 0 when multiplied or divided by 0. |
| Claudio | what do you mean, Laurel? |
| Pooh | How can this problem be answered using calculator? (Using TI BAII plus) |
| tymao | TI BAII plus: n=19, I/Y=8, PMT=100, FV=0, CPT PV=960.36, add $100 to make 1060.36 or set as BGN mode. |
| jaan | Set your TI BAII plus in BGN mode: 2nd BGN 2nd [SET], also set 2nd [P/Y] =1 then enter values n=20, I/Y=8, PMT=-100, FV=0, CPT PV = 1060.3599 if you get negative value that would be due to your PMT, so enter PMT as negative number |
| suraj | PV of annuity due= PV of ordinary annuity *(1+r) PV =100[1/0.08 -1/0.08(1.08)^20]=981.81 PV(Due)=981*1.08=1060.35 |
| danlan | Set the bgn mode or calculate as tymao |
| mansi | Instead of setting the calculator in the BGN mode calculate for ordinary annuity and multiply it with (1+r) it will give the same answer. it will bocome a problem for other questions if u forget to change the mode from BGN back to END mode. |
| ashok1959 | can any one tell me how to set calculator from end to bgn mode. |
| arkot90 | for hp calculator just press g beg to set to bgn mode or g end to return to end mode |
| olagbami | u can jst calculate the ordinary annuity using d default mode of d BA II plus calculator (no need to adjust ur calculator) and multiply ur result by 1+r. That will give u d annuity due. |
| sogah | thanks jaan that helped |
| EEEEvia | can anyone tell me why FV=0?? |
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Learning Outcome Statements
calculate and interpret the present value(PV) of fixed-income and equity instruments based on expected future cash flows
calculate and interpret the implied return of fixed-income instruments and required return and implied growth of equity instruments given the present value (PV) and cash flows
CFA® 2024 Level I Curriculum, Volume 1, Module 2.