The present discounted value of a $35 payment with an interest rate of 12 percent received every year for three years is
A) $94.15.
B) $84.06.
C) $105.00.
D) $24.91.

Question

Quizplus · Accepted Answer

Using the formula for present value of an annuity: 
PV = (Payment/Interest rate) x (1 - 1/(1+interest rate)^n)
Where Payment = $35, Interest rate = 0.12, n=3
PV = (35/0.12) x (1 - 1/(1+0.12)^3)
PV = $84.06
Therefore, the answer is B) $84.06.

The Present Discounted Value of a $35 Payment with an Interest