Bill makes $100 payments at the end of each year for 5 years. If interest rates are 8%, what is the present value of this annuity stream?
A) $500
B) $399.27
C) $475
D) $455.63

Question

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula: PV = Pmt * [(1 - (1 + r)^-n) / r], where Pmt is the payment amount, r is the interest rate, and n is the number of periods. Plugging in the values: PV = 100 * [(1 - (1 + 0.08)^-5) / 0.08] = $399.27.

Bill Makes $100 Payments at the End of Each Year