If we will receive $100 per year beginning one year from now for a period of three years with a 12% discount rate, what would be the value of our investment today?
A) $230
B) $240
C) $250
D) $260

Question

Quizplus · Accepted Answer

The value of the investment today can be calculated using the present value formula for an annuity: PV = P * [(1 - (1 + r)^-n) / r], where P is the payment amount, r is the discount rate, and n is the number of periods. Here, P = $100, r = 12% or 0.12, and n = 3. Plugging these values into the formula gives PV = $100 * [(1 - (1 + 0.12)^-3) / 0.12] ≈ $240.

If We Will Receive $100 Per Year Beginning One Year