The present value of an annuity stream of $5,000 per year for 10 years at 6% is closest to?

Question

Quizplus · Accepted Answer

This problem requires us to find the present value of an annuity stream of $5,000 per year for 10 years at 6%. We can use the formula for present value of an annuity:

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

Where PV is the present value, PMT is the amount of each payment, r is the interest rate per period, and n is the total number of periods.

Plugging in the values, we get:

PV = $5,000 x [1 - 1/(1+0.06)^10] / 0.06
PV = $5,000 x [1 - 0.558394] / 0.06
PV = $5,000 x 8.723278
PV = $43,616.39

Therefore, the present value of the annuity stream is closest to $36,800 (rounded to the nearest dollar). The correct answer is B.

The Present Value of an Annuity Stream of $5,000 Per