Using the present value tables, please compute the present value of an annuity which pays $2 000 per year for 10 years, discounted at 7%.
A)$14 048
B)$16 440
C)$19 240
D)$18 180

Question

Quizplus · Accepted Answer

The present value of an annuity is the sum of the present values of each individual payment. The present value of each payment is calculated by multiplying the payment amount by the present value factor for the corresponding number of years. The present value factor is the present value of $1 received at the end of the year, discounted at the given interest rate.In this case, the payment amount is $2,000, the number of years is 10, and the interest rate is 7%. The present value factor for 10 years at 7% is 7.02358. Therefore, the present value of each payment is $2,000 x 7.02358 = $14,047.16.The present value of the annuity is the sum of the present values of each individual payment, which is $14,047.16 x 10 = $140,471.60.

Using the Present Value Tables, Please Compute the Present Value