What is the present value of ten payments of $200 at the end of each of the next ten years if the interest rate is 7 percent?
A)$1,404.71
B)$1,396.78
C)$890.00
D)$1,825.36

Question

Quizplus · Accepted Answer

The present value of an annuity (a series of equal payments at regular intervals) can be calculated using the formula PV = P * [(1 - (1 + r)^-n) / r], where P is the payment amount, r is the interest rate per period, and n is the number of periods. Plugging in the values given ($200 payments, 7% interest rate, and 10 periods), the calculation gives us the present value of these payments, which is closest to $1,404.71.

What Is the Present Value of Ten Payments of $200