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Future Value and Present Value?

23 Mar

I am in Financial Management and I am not sure which formula to use for these problems. Any help would be appreciated. Thanks!
1. Linda has decided to set up an account that will pay her granddaughter $5000 a year indefinately. How much should Linda deposit in an account paying 8 percent annyal interest?

2. Cara establishes a seven year, 8 percent load with a bank requiring annual end of the year payments of 960.43. Calculate the original principal amount.

Does anyone know if I use Present Value Annuity Due, Present Value Ordinary Annuity, Present Value, Future Value Annuity due, Future Value Ordinary Annuity or Future Value?
Thanks!!

 
1 Comment

Posted in Value of Future Payments

 

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  1. cavz4lyfe

    March 23, 2010 at 12:07 pm

    Quesiton 1: you just divide the amount needed per year by the interest rate to get the answer (5000/.08 = 62500)

    Question 2: Present Value of Ordinary Annuity