Find the present value of an ordinary annuity of $500 payments each made quarterly over 6 years and earning interest at 8% per year compounded quarterly.
A) $5,264.38
B) $2,311.44
C) $9,456.96
D) $24,968.07

Question

Find the present value of an ordinary annuity of $500 payments each made quarterly over 6 years and earning interest at 8% per year compounded quarterly. ​
A) $5,264.38
B) $2,311.44
C) $9,456.96
D) $24,968.07

Quizplus · Accepted Answer

The present value of an ordinary annuity can be calculated using the formula: PV = Pmt * [(1 - (1 + r)^-n) / r], where Pmt is the payment amount, r is the interest rate per period, and n is the total number of payments. Here, Pmt = $500, r = 0.08/4 = 0.02, and n = 6*4 = 24. Plugging these values into the formula gives the present value as approximately $9,456.96.

Find the Present Value of an Ordinary Annuity of $500