What is the value today of an investment that pays $500 every year at year-end during the next 15 years if the annual interest rate is 9%?
A) $4,030.50
B) $7,500.00
C) $3,500.00
D) $7,000.00

Question

Quizplus · Accepted Answer

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

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

Where PV = present value, C = annual payment, r = interest rate, and n = number of years.

Substituting the given values, we get:

PV = 500 x [(1 - (1 + 0.09)^-15) / 0.09]
PV = $4,030.50 (rounded to the nearest cent)

Therefore, the value today of the investment is $4,030.50. Option A is the correct answer.

What Is the Value Today of an Investment That Pays