Juan has just received a prize which entitles him to receive annual payments of $10,000 for the next 10 years. In order to calculate the overall value of the prize today, which of the following tables would be the best for him to use?

Question

Quizplus · Accepted Answer

Since Juan is receiving a fixed annual payment for 10 years, the table that calculates the present value of an annuity (B) would be the best choice to calculate the overall value of the prize today. This table takes into account the time value of money and calculates the present value of a stream of cash flows. The other tables (A, C, and D) calculate either single lump-sum values (present or future) or future value of a stream of cash flows, which is not applicable in this scenario.

Juan Has Just Received a Prize Which Entitles Him to Receive