What is the present value of $500 received at the end of each of the next 5 years worth to you today at the appropriate discount rate of 6%?

Question

Quizplus · Accepted Answer

To find the present value of an annuity, we can use the formula: 
PV = C * [(1 - (1+i)^-n) / i], where PV is the present value, C is the amount of each payment, i is the discount rate, and n is the number of periods. 
Plugging in the values, we get: 
PV = 500 * [(1 - (1+0.06)^-5) / 0.06] 
PV = $2,106.26 (rounded to nearest cent) 
Therefore, the present value of the annuity is $2,106. Thus, the best choice is C.

What Is the Present Value of $500 Received at the End