The present value of a $100 three-year annuity due (first cash flow occurs today)discounted at a rate of 10% is equal to ________.
A)$248.69
B)$273.55
C)$135.17
D)$300.00

Question

Quizplus · Accepted Answer

An annuity due means the first payment occurs immediately. The present value of an annuity due can be calculated using the formula for the present value of an ordinary annuity and then multiplying by (1 + r) to account for the immediate payment. The present value of a $100 annuity due for 3 years at 10% is $273.55.

The Present Value of a $100 Three-Year Annuity Due (First