Find the present value of the ordinary annuity.
-Payments of $68 made quarterly for 10 years at 8% compounded quarterly
A) $1872.41
B) $1860.17
C) $1829.38
D) $667.63

Question

Quizplus · Accepted Answer

Using the formula for the present value of an ordinary annuity: PV = PMT x ((1 - (1 + r)^(-n)) / r)

PMT = $68 (quarterly)
r = 0.08/4 = 0.02 (quarterly)
n = 10 x 4 = 40 (number of quarterly periods)

PV = 68 x ((1 - (1 + 0.02)^(-40)) / 0.02) = $1,860.17

Therefore, the best choice is B.

Find the Present Value of the Ordinary Annuity