An investment today of $8,424 at 6% will yield $2,000 per year for the next five years because interest is being earned on principal that is left invested each year.The following tables are available:
Present value of $1:

Present value of ordinary annuity of $1:

Question

An investment today of $8,424 at 6% will yield $2,000 per year for the next five years because interest is being earned on principal that is left invested each year.The following tables are available:
Present value of $1:
  
Present value of ordinary annuity of $1:

Quizplus · Accepted Answer

The present value of an ordinary annuity of $1 can be used to calculate the present value of the five-year annuity of $2,000 per year, which is $8,993. Using the present value of $1 table, we can find that the present value of $8,424 at 6% is $5,115. Therefore, investing $5,115 today will allow for the receipt of an annuity of $2,000 per year for five years, totaling $10,000 in earnings. This represents a return of approximately 96.9% over the five-year period, which is consistent with the 6% interest rate. Therefore, the statement is true.

An Investment Today of $8,424 at 6% Will Yield $2,000