Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 6 - Accounting and the Time Value of Money - Review and Practice - Questions - Page 301: 13

Answer

The ordinary annuity factor is multiplied by (the sum of 1 and the interest rate) to obtain the "future value of annuity due factor". To elaborate, the computation of the interest factor for an annuity due that takes 10 periods at a compound interest rate of 15% is: Ordinary due interest factor =20.30372 The annuity due factor = 20.30372 x (1 + 0.15) =23.239278

Work Step by Step

The ordinary annuity factor is multiplied by (the sum of 1 and the interest rate) to obtain the "future value of annuity due factor". To elaborate, the computation of the interest factor for an annuity due that takes 10 periods at a compound interest rate of 15% is: Ordinary due interest factor =20.30372 The annuity due factor = 20.30372 x (1 + 0.15) =23.239278
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