Assume that you will receive $ 5,000 cash each year for four years. Considering a discount rate of 2%, what is the present value of this annuity?

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 annual payment, r is the discount rate, and n is the number of periods. Plugging in the values: PV = 5000 × [(1 - (1 + 0.02)^-4) / 0.02] = $19,038.64.

Assume That You Will Receive $ 5,000 Cash Each Year