What is the present value of four annual payments of $5,000 at a discount rate of 12%?

Question

Quizplus · Accepted Answer

The present value of an annuity formula is:

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

where PV is the present value, Payment is the amount of each payment, r is the discount rate, and n is the number of periods.

Plugging in the numbers, we get:

PV = $5,000 * [1 - (1+0.12)^(-4)] / 0.12
PV = $5,000 * [1 - 0.6355] / 0.12
PV = $5,000 * 0.3645 / 0.12
PV = $15,187.50

Therefore, the best choice is B, as it is the closest to our calculated present value.

What Is the Present Value of Four Annual Payments of $5,000