Assuming an interest rate of 10%, the present value of $11,000 received at the end of each year for 6 years would be closest to

Question

Quizplus · Accepted Answer

To calculate the present value of an annuity, we need to use the formula:

PV = C × [(1 - 1 / (1 + r)n) / r]

Where PV is the present value, C is the annual cash flow, r is the interest rate, and n is the number of years.

Plugging in the values, we get:

PV = $11,000 × [(1 - 1 / (1 + 0.1)6) / 0.1]
PV ≈ $47,905

Therefore, the closest answer is C) $47,905.

Assuming an Interest Rate of 10%, the Present Value of $11,000