The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is _________.
A) $1,750
B) $288
C) $1,558
D) $1,896

Question

Quizplus · Accepted Answer

Using the formula for the present value of an ordinary annuity:

PV = C * ((1 - (1 + r)^(-n)) / r)

where PV is the present value, C is the amount of the annuity payment, r is the opportunity cost rate, and n is the number of payments.

Plugging in the values, we get:

PV = $350 * ((1 - (1 + 0.04)^(-5)) / 0.04)
PV = $1,558.03

Therefore, the answer is Choice C, $1,558.

The Present Value of an Ordinary Annuity of $350 Each