A four-year annuity of $1,000 annual payments at the beginning of each year, with a 10% interest rate is worth how much today?
A)$2,914.67
B)$3,486.85
C)$3169.87
D)None of the above

Question

Quizplus · Accepted Answer

The correct answer is found using the formula for the present value of an annuity due, which accounts for payments at the beginning of each period. The formula is PV = P * [(1 - (1 + r)^-n) / r] * (1 + r), where P = payment, r = interest rate per period, and n = number of periods. Plugging in the values (P = $1,000, r = 10% or 0.10, n = 4), we get PV = $1,000 * [(1 - (1 + 0.10)^-4) / 0.10] * (1 + 0.10) = $3,486.85.

A Four-Year Annuity of $1,000 Annual Payments at the Beginning