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What is the present value of the annuity in both scenarios

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Reference no: EM132920070

Consider two scenarios:

1. An annuity of $250 paid at the end of each quarter for 5 years; and

2. An annuity of $250 paid at the beginning of each quarter for 5 years.

In both cases, the yield is 8.3% per annum compounded quarterly.

Required

Problem (a) What is the present value of the annuity in both scenarios?

Problem (b) Explain with reasons if there is any difference in the present value you derived in part (a) above.

Problem (c) Will the present value of the annuity calculated in part (a) change if the annuity is $125 each quarter for 10 years instead? Why or why not?

Reference no: EM132920070

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