You expect to receive $1,000 at the end of each year, for the next 10 years, If you can invest this money at 4 percent per year over 10 years, how much will the stream of payment be worth today?

Question

Quizplus · Accepted Answer

This problem requires us to find the present value of an annuity, which is a series of regular payments. We can use the formula:

PV = PMT x [1 - 1/(1+r)^n] / r

where PV is the present value, PMT is the payment amount, r is the interest rate, and n is the number of payments.

Plugging in the numbers, we get:

PV = $1,000 x [1 - 1/(1+0.04)^10] / 0.04
PV = $1,000 x [1 - 0.5963] / 0.04
PV = $8,110.90

Therefore, the best choice is C.

You Expect to Receive $1,000 at the End of Each