Calculate the present value of the following: a-1. annual payment of $800 for 10 years at 5% interest. (do not round intermediate calculations. round your answer to 2 decimal places.) a-2. annual payment of $600 for 15 years at 5% interest. (do not round intermediate calculations. round your answer to 2 decimal places.) a-3. which option would you prefer? b-1. annual payment of $800 for 10 years at 20% interest. (do not round intermediate calculations. round your answer to 2 decimal places.) b-2. annual payment of $600 for 15 years at 20% interest. (do not round intermediate calculations. round your answer to 2 decimal places.) b-3. which option would you prefer?

a-1 Present value = 6,177.39

a2- Present Value =6,227.79

a3- Choose the payment stream with the highest present value = a2

b1- Present Value=3,353.98

b2-Present Value=2,805.28

b3-Choose the payment stream with the highest present value = b1

Explanation:

a-1 describes an ordinary annuity whose present value is calculated as follows:

where PMT=$800; i= 5%, n= 10

= 6,177.39

a2- = 6,227.79

a3- If I were receiving these payments annually, I would prefer the payment stream with the highest present value ie a2 -Annual payment of $600 for 15 years at 5% interest.

b1- = 3,353.98

b2- =2,805.28

b3- f I were receiving these payments annually, I would prefer the payment stream with the highest present value ie b1- Annual payment of $800 for 10 years at 20% interest.