What is the most you would pay for a $100 per year ordinary annuity over ten years using an 8% annual interest rate.
A) $671
B) $800
C) $1000
D) $2159

Question

Quizplus · Accepted Answer

The present value of an ordinary annuity can be calculated using the formula PV = PMT * [(1 - (1 + r)^-n) / r], where PV is the present value, PMT is the annual payment ($100), r is the annual interest rate (8% or 0.08), and n is the total number of payments (10 years). Plugging in the values, we get PV = $100 * [(1 - (1 + 0.08)^-10) / 0.08] ≈ $671.

What Is the Most You Would Pay for a $100