A 10-year,$600 annuity pays its first payment at Date 3.If you compute the present value of this annuity,the computed value will be as of Date

Question

Quizplus · Accepted Answer

The present value of an annuity is the sum of the present values of its individual cash flows. Since the first payment is made at Date 3, we need to discount the payments back to Date 2 (one year prior to the first payment) in order to obtain their present value. Therefore, the present value is as of Date 2, making option C the best choice.

A 10-Year,$600 Annuity Pays Its First Payment at Date 3