标题: How do i know that this question is asking for annuity due? [打印本页] 作者: scr879 时间: 2011-7-11 18:37
draw a timeline for all such tvm problems.
he wishes to draw on that birthday itself. so it is an annuity due.
if it had been one year later - it would have been a regular annuity.
also recognize that an PV(annuity due) = PV(Annuity) + PMT.
CP作者: invic 时间: 2011-7-11 18:37
put another way - you want to know how much money he needs at the time payments begin.作者: richer 时间: 2011-7-11 18:37 标题: How do i know that this question is asking for annuity due?
a question from qbank on annuity:
How much should an investor have in a retirement account on his 65th birthday if he wishes to withdraw $40,000 on that birthday and each of the following 14 birthdays, assuming his retirement account is expected to earn 14.5%?
A) $234,422.
B) $274,422.
C) $272,977.
Your answer: A was incorrect. The correct answer was B) $274,422.
This is an annuity due so set your calculator to the BGN mode. N = 15; I/Y = 14.5; PMT = –40,000; FV = 0; CPT ? PV = 274,422.50. Switch back to END mode.
Actually from the question above, how do i know that this is an annuity due question? i calculate using the end mode instead of bgn mode.
