Determine the current economic value of a 25-year annuity providing $10,000 per year for the first 10 years, $15,000 for the next 10 years and $25,000 for the last 5 years, given an interest rate of 6.3% compounded annually.
A) $159,025.85
B) $160,980.01
C) $162,432.65
D) $163,854.18
E) $167,525.89

Question

Quizplus · Accepted Answer

The present value of the annuity is calculated by discounting each cash flow back to the present value using the given interest rate. The annuity is divided into three segments, each with different cash flows. The present value of each segment is calculated separately and then summed to get the total present value. The correct calculation results in $162,432.65.

Determine the Current Economic Value of a 25-Year Annuity Providing