Texas Instruments BA-20 Profit Manager User Manual - Page 34

Example: Computing Perpetual Annuities, Perpetual ordinary annuity

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To Compute present value (ordinary annuity). Set beginning-of-period payments. Return to calculator mode. Compute present value (annuity due). Press % . Display PV= 122,891.34 & ] & V BGN & U % . 0.00 PV= 135,180.48 Answer: The present value of the savings is $122,891.34 with an ordinary annuity and $135,180.48 with an annuity due. Example: Computing Perpetual Annuities To replace bricks in their highway system, the Land of Oz has issued perpetual bonds paying $110 per $1000 bond. What price should you pay for the bonds to earn 15% annually? To Calculate the present value for a perpetual ordinary annuity. Calculate the present value for a perpetual annuity due. Press 110 6 15 2 N H 110 N Display 733.33 843.33 Answer: You should pay $733.33 for a perpetual ordinary annuity and $843.33 for a perpetual annuity due. A perpetual annuity can be an ordinary annuity or an annuity due consisting of equal payments continuing indefinitely (for example, a preferred stock yielding a constant dollar dividend). Perpetual ordinary annuity 30 Time-Value-of-Money and Amortization Worksheets

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30
Time-Value-of-Money and Amortization Worksheets
Answer:
The present value of the savings is $122,891.34 with an ordinary
annuity and $135,180.48 with an annuity due.
Example: Computing Perpetual Annuities
To replace bricks in their highway system, the Land of Oz has issued
perpetual bonds paying $110 per $1000 bond. What price should you pay
for the bonds to earn 15% annually?
Answer:
You should pay $733.33 for a perpetual ordinary annuity and
$843.33 for a perpetual annuity due.
A
perpetual annuity
can be an ordinary annuity or an annuity due
consisting of equal payments continuing indefinitely (for example, a
preferred stock yielding a constant dollar dividend).
Perpetual ordinary annuity
Compute present value
(ordinary annuity).
% .
PV=
122,891.34
Set beginning-of-period
payments.
&
] &
V
BGN
Return to calculator mode.
& U
0.00
Compute present value
(annuity due).
% .
PV=
135,180.48
To
Press
Display
Calculate the present value for a
perpetual ordinary annuity.
110
6
15
2 N
733.33
Calculate the present value for a
perpetual annuity due.
H
110
N
843.33
To
Press
Display