What is the present value of a $1,000 per year annuity for five years at an interest rate of 12%?
A)$6,352.85
B)$3,604.78
C)$567.43
D)$2,743.28

Question

Quizplus · Accepted Answer

To find the present value of an annuity, we use the formula:

PV = PMT x (1 - 1/(1+r)^n) / r

Where:
PMT = annual payment
r = interest rate
n = number of periods

Plugging in the values:

PV = 1000 x (1 - 1/(1+0.12)^5) / 0.12
PV = $3,604.78

Therefore, the best choice is (B).

What Is the Present Value of a $1,000 Per Year