To calculate the present value of an annuity, multiply the
A)principal amount by the present value factor.
B)amount to be received each year by the present value factor.
C)principal by the discounted interest rate.
D)amount to be received each year by the discounted interest rate.

Question

Quizplus · Accepted Answer

To calculate the present value of an annuity, you need to determine the amount to be received each year and multiply it by the present value factor, which takes into account the interest rate and number of years. Option A is incorrect because it assumes a lump sum payment instead of an annuity. Option C is incorrect because it only takes into account the interest rate without factoring in the number of years. Option D is incorrect because it assumes a discounted interest rate for each payment, rather than a present value factor.

To Calculate the Present Value of an Annuity, Multiply the