Parker Posie wants to determine how much she must deposit today at 14% interest to provide four withdrawals of $26,000 at the end of each year, beginning five years from now. This is an example of the present value of
A) an ordinary annuity
B) an annuity due
C) a single sum
D) a deferred ordinary annuity

Question

Quizplus · Accepted Answer

This is an example of a deferred ordinary annuity, which means that the payments will begin in the future. In order to calculate the present value of this annuity, we need to determine the amount that must be invested today to provide for these future payments. Therefore, we must use a deferred annuity formula to calculate the present value of these future payments.

Parker Posie Wants to Determine How Much She Must Deposit