Question

Calculate the 2 year annuity factor if the required rate of return is 10%.

Answer 1

What is the 2-year annuity factor?

The 2-year present value annuity factor can be found by using the formula for the present value of an annuity.

That is, Amount x ( 1 - (1 + rate) ^ - number of periods ) / rate

Replace the amount with 1 when calculating for factor:

therefore,

= 1 x ( 1 - (1 + 10%)⁻²) / 10%

= 1 x 0.173553719 / 10%

= 1.7355

The rate of return is 10%, then the 2-year annuity factor can be calculated as 1.7355.

Answer 2

Answer:

The rate of return is $10$ percent then the $2$ year annuity factor can be calculated as $1.7355$

Explanation:

Given data: rate of return= 10%,

To find: 2 year annuity factor

Solution:

The $2$ year present value annuity factor can be found by using the formula for the present value of an annuity.

That is, $amount\times(1-(1+rate)^-number of periods/rate)$

Replace the amount with 1 when calculating for factor

Therefore,

$=1\times 0.173553719/10%\\=1,7355$

Hence the rate of return is 10% then the 2 year annuity factor can be calculated as 1.7355.