Kay owns two annuities that will each pay $500 a month for the next 12 years. One payment is received at the beginning of each month while the other is received at the end of each month. At a discount rate of 7.25 percent, compounded monthly, what is the difference in the present values of these annuities

The difference in the present values of these annuities is$290

Explanation:

Payment of fixed amount for a fixed period of time on a fixed rate of return is called annuity.

Immediate Payment of fixed amount for a fixed period of time on a fixed rate of return is called advanced annuity.

According to given data

P = monthly payment = $500 every month

r = interest rate = 7.25% per year = 7.25 / 12 = 0.6042% = 0.006042

n = number of period = 12 years x 12 month a year = 144 periods

First Annuity

PV of annuity = P x [ ( 1- ( 1 + r )^-n ) / r ]

PV of annuity = $500 x [ ( 1- ( 1 + 0.006042 )^-144 ) / 0.006042 ]

PV of annuity = $47,995

First Annuity

PV of annuity = P x [ ( 1- ( 1 + r )^-(n-1) ) / r ] + P

PV of annuity = $500 x [ ( 1- ( 1 + 0.006042 )^-(144-1) ) / 0.006042 ] + $500

PV of annuity = $500 x [ ( 1- ( 1 + 0.006042 )^-(143) ) / 0.006042 ] + $500

PV of annuity = $48,285

Difference  = $48,285 - $47,995 = $290

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

one of the disadvantages of getting a government sponsored mortgage is they put a limit on the purchase price of the house. because the government is in charge of the mortage loan and terms, they are able to control how much money they are allowing someone to take out for the loan. not only are they incontrol, it's a lengthy process for a government sponsored mortgage.