How much must be invested today in order to generate a five-year annuity of $1,000 per year, with the first payment one year from today, at an interest rate of 12 percent?
A)$3,604,78
B)$3,746.25
C)$4,037.35
D)$4,604.78 PV =

Question

Quizplus · Accepted Answer

The present value of an annuity is calculated as follows:PV = PMT * [1 - (1 + r)^-n] / rwhere:PV is the present valuePMT is the annual paymentr is the annual interest raten is the number of yearsIn this case, PMT = $1,000, r = 12%, and n = 5. Plugging these values into the formula, we get:PV = $1,000 * [1 - (1 + 0.12)^-5] / 0.12PV = $1,000 * [1 - 0.5674] / 0.12PV = $1,000 * 0.4326 / 0.12PV = $3,604.78Therefore, the correct answer is A) $3,604.78.

How Much Must Be Invested Today in Order to Generate