What is the present value of an annuity due consisting of 5 annual payments of $1,000 with an interest rate of 8% p.a. ,with the first payment occurring in 5 years' time?
A)$4,283.23
B)5,392.13
C)$2,935.30
D)$5,312.13

Question

Quizplus · Accepted Answer

The present value of an annuity due is calculated by first finding the present value of an ordinary annuity and then adjusting for the fact that payments are made at the beginning of each period. Since the first payment occurs in 5 years, we calculate the present value of the annuity as if it starts in 5 years and then discount it back to the present.

What Is the Present Value of an Annuity Due Consisting