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LESSON 16-2 Present Value and Annuities

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Presentation on theme: "LESSON 16-2 Present Value and Annuities"— Presentation transcript:

1 LESSON 16-2 Present Value and Annuities
5/22/2019 LESSON 16-2 Present Value and Annuities RED

2 PRESENT VALUE OF AN ANNUITY
page 479 *Includes a $0.20 rounding error. LESSON 16-2

3 PRESENT VALUE OF AN ANNUITY
page 479 Interest Rate Balance on January 1 Interest Earned × = $3,170.00 × = $317.00 10% Interest Earned Balance on January 1 Pre-Payment Balance + = $3,170.00 + = $3,487.00 $317.00 December 31 Payment Pre-Payment Balance – = $3,487.00 – = $2,487.00 $1,000.00 LESSON 16-2

4 PRESENT VALUE OF AN ANNUITY
page 480 Annual Payment $ 1,000.00 Present Value Factor × Present Value of an Annuity $ 3,170.00 LESSON 16-2

5 FINANCIAL PLANNING DECISIONS USING THE PRESENT VALUE OF AN ANNUITY
page 481 Annual Payment $ 50,000.00 Present Value Factor × Present Value of an Annuity $ 533,750.00 LESSON 16-2

6 BUSINESS DECISIONS USING THE PRESENT VALUE OF AN ANNUITY
LESSON 16-2 5/22/2019 BUSINESS DECISIONS USING THE PRESENT VALUE OF AN ANNUITY page 482 Annual Net Cash Flows $ 5,000.00 Present Value Factor × Present Value of an Annuity = $ 20,555.00 Investment – 22,000.00 Net Present Value = $ (1,445.00) LESSON 16-2 RED

7 TERMS REVIEW page 483 annuity present value of an annuity LESSON 16-2

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