What is the present value today of an ordinary annuity cash flow of $4,000 per year for thirty years at an interest rate of 6.0% per year?
A)$120,000.00
B)$55,059.32
C)$45,139.89
D)$32,270.87

Question

Quizplus · Accepted Answer

To calculate the present value of an ordinary annuity, we can use the formula:

PV = C * [(1 - (1+r)^-n) / r]

where PV is the present value, C is the annual cash flow, r is the interest rate per period, and n is the number of periods.

Plugging in the values given, we get:

PV = 4,000 * [(1 - (1+0.06)^-30) / 0.06]
PV = $55,059.32

Therefore, the present value today of the annuity is $55,059.32. The answer is B.

What Is the Present Value Today of an Ordinary Annuity