The present value on January 1,2010 of 8 annual payments of $7,500 each with the first payment to be made on January 1,2011,assuming a 9% interest rate is:
A)$63,764.25
B)$41,511.14
C)$30,114.00
D)$82,713.75

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 interest rate per period, and n is the number of periods. Here, P = $7,500, r = 9% or 0.09, and n = 8. Plugging these values into the formula gives a present value of approximately $41,511.14.

The Present Value on January 1,2010 of 8 Annual Payments