The present value of $5,000 per year for three years at 12% compounded annually is $12,009.
Calculation: $5,000 x 2.4018 = $12,009.

Question

Quizplus · Accepted Answer

To calculate the present value of an annuity, we use the formula:

PV = A x [(1 - (1+r)^-n) / r]

where PV is the present value, A is the annual payment, r is the interest rate, and n is the number of periods.

In this case, we have A = $5,000, r = 12%, and n = 3. Plugging these values into the formula, we get:

PV = $5,000 x [(1 - (1+0.12)^-3) / 0.12] = $12,009.01 (rounded to the nearest cent)

Therefore, the statement is True.

The Present Value of $5,000 Per Year for Three Years