Time value of money

Find the present value of an annuity due of $5,000 received quarterly for the next 4 years discounted at 12%.

A sinking fund is planned to have $250,000 in five years. What is the investment needed at the beginning of each year if the investment funds earn 7 % interest compounded annually?

Suppose you plan to invest Kshs. 200,000 today for a period of 5 years. If the interest rate is 8%, how much income per year, should you receive in order to recover your investment?

An insurance company has issued a Guaranteed Investment Contract (GIC) that promises to pay Kshs. 10,000,000 in six years with a promised return of 8%. What amount of money must the insurer invest today at 8% for six years to make the promised payment?

Which of the following would you prefer given a discount rate of 10%? – Show working

  1. An annuity of $6,600 at the end of each year for 30 years
  2. An annuity of $7,600 at the beginning of each year for 20 years                                                                                                                            

Answer below and give reason:                                                                                                                                                                                                                  

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