Kristen's grandmother promises to give her $1,000 at the end of each of the next five years.How much is the money worth today,assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar).

Question

Quizplus · Accepted Answer

The present value of an annuity formula is used to calculate the worth of $1,000 received annually for five years at a 6% discount rate. The calculation is: PV = $1,000 * [(1 - (1 + 0.06)^-5) / 0.06] = $4,212.

Kristen's Grandmother Promises to Give Her $1,000 at the End