The present value of $4,000 to be received each year for three years and earning a 10 percent return (rounded) is

Question

Quizplus · Accepted Answer

The present value of an annuity 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 ($4,000 annual payment, 10% or 0.10 interest rate, and 3 years), we get PV = $4,000 * [(1 - (1 + 0.10)^-3) / 0.10] = $9,948 (rounded).

The Present Value of $4,000 to Be Received Each Year