If the future value annuity factor at 10 percent and five years is 6.1051, calculate the equivalent present value annuity factor:
A)6.1051
B)3.7908
C)6.7156
D)4.8127

Question

Quizplus · Accepted Answer

The equivalent present value annuity factor can be calculated using the formula: PVAF = 1 / (1 + r)^n x [1 - 1 / (1 + r)^n] / r, where r is the interest rate and n is the number of periods. Rearranging this formula, we get: PVAF = (1 - 1 / (1 + r)^n) / r x (1 + r)^-n. Substituting the given values, we get: PVAF = (1 - 1 / 1.1^5) / 0.1 x 1 / 1.1^5 = 3.7908. Therefore, the correct answer is B.

If the Future Value Annuity Factor at 10 Percent and Five