What is the present value (PV)of an investment that pays $15 000 every year for three years if the interest rate is 5% APR, compounded quarterly?
A)$45 000
B)$40 700
C)$40 760
D)$38 680

Question

Quizplus · Accepted Answer

First, we need to calculate the quarterly interest rate: 
5% APR = 1.25% quarterly

Next, we can use the present value formula: 
PV = (Payment/((1+interest rate)^n))/interest rate * (1+interest rate)

PV = (15000/((1+0.0125)^1))/0.0125 * (1+0.0125) + (15000/((1+0.0125)^2))/0.0125 * (1+0.0125)^2 + (15000/((1+0.0125)^3))/0.0125 * (1+0.0125)^3

PV = $40,760

Therefore, the best choice is C.

What Is the Present Value (PV)of an Investment That Pays