Plimpton has an annuity due that pays $800 per year for 11 years.What is the present value of the cash flows if they are discounted at an annual rate of 7.50%?
A)$5,296.27
B)$5,693.49
C)$6,291.26
D)$8,800.00

Question

Quizplus · Accepted Answer

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 payments occurring at the beginning of each period. Using the formula: PV = Pmt * [(1 - (1 + r)^-n) / r] * (1 + r), where Pmt = $800, r = 0.075, and n = 11, the present value is approximately $6,291.26.

Plimpton Has an Annuity Due That Pays $800 Per Year