What is the present value of four payments of $5,000 at the end of each of the next four years if the interest rate is 2 percent?
A)$9,430.50
B)$18,358.12
C)$20,000.00
D)$19,038.64

Question

Quizplus · Accepted Answer

Using the formula for present value of an ordinary annuity:

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

PV = $5,000 x [1 - (1 + 0.02)^(-4)] / 0.02
PV = $19,038.64

Therefore, the present value of the four payments is $19,038.64.

What Is the Present Value of Four Payments of $5,000