BUSINESS ADMINISTRATION
BUSINESS MATHEMATICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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RM30, 000
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RM134, 231.67
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RM32, 150.66
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None of the above
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Detailed explanation-1: -Present value of annuity = Annuity x (1-( 1 + interest rate ) -time period) / interest rate. Present value of annuity = $5, 000 x (1-( 1 + 0.18)-7) / 0.18. Present value of annuity = $5, 000 x 2.3139. Present value of annuity = $11, 569.50 (Approximately)
Detailed explanation-2: -Answer is Ordinary or Immediate Annuity. An ordinary annuity or immediate annuity is where payments are made at the end of each payment period, i.e. 1st payment is made at the end of the 1st payment interval, and so on. Examples are repayment of car loans, house mortgage etc.
Detailed explanation-3: -An ordinary annuity is an annuity in which the cash flows, or payments, occur at the end of the period. The cash flows occur at the end of years 1 through 5.
Detailed explanation-4: -The future value of any annuity equals the sum of all the future values for all of the annuity payments when they are moved to the end of the last payment interval. For example, assume you will make $1, 000 contributions at the end of every year for the next three years to an investment earning 10% compounded annually.