What is the present value of an annuity of $120 received at the end of each year for 11 years? Assume a discount rate of 7%.The first payment will be received one year from today (round to nearest $1).
A) $250
B) $400
C) $570
D) $900

Question

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula PV = P * [(1 - (1 + r)^-n) / r], where P is the payment amount, r is the discount rate per period, and n is the number of periods. Plugging in the values given (P = $120, r = 0.07, n = 11), we get PV = $120 * [(1 - (1 + 0.07)^-11) / 0.07], which calculates to approximately $900 when rounded to the nearest dollar.

What Is the Present Value of an Annuity of $120