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Answer the following statements true (T) or false (F)
1. A company borrows $10,000 and issues a 5-year, 6% installment note with interest payable annually. The factor for the present value of an annuity at 6% for 5 years is 4.2124. The factor for the present value of a single sum at 6% for 5 years is 0.7473. The amount of the annual payment is $2,373.94.
2. A company borrows $40,000 and issues a 3-year, 10% installment note with interest payable annually. The factor for the present value of an annuity at 10% for 3 years is 2.4869. The factor for the present value of a single sum at 10% for 3 years is 0.7513. The amount of the annual payment is $12,000.
3. An annuity is a series of equal payments at equal time intervals.
4. The present value of an annuity is equal to the sum of the individual future values for each payment.
5. The factor for the present value of an annuity at 8% for 10 years is 6.7101. This implies that an annuity of ten $15,000 payments at 8% yields a present value of $2,235.

Respuesta :

maryasay

Answer: 1. TRUE

2. FALSE

3. TRUE

4. FALSE

5. FALSE

Explanation:

1. To calculate the Future value of an Annuity,

Future value = [tex]\frac{Present Value, PV}{Annuity Factor}[/tex]  

                     =  [tex]\frac{10000}{4.2124}[/tex]  

                     = 2.373.94

2. Although the present table value and annuity value are correct, the annual payment is $16,084

3. An annuity is a series of equal payments at equal time intervals.

4. The present value of an annuity is equal to the sum of the present values for each payment.

5. This statement is false. If the factor for the present value of an annuity at 8% for 10 years is 6.7101, this implies that an annuity of ten $2,235 payments at 8% yields a present value of $15,000.

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