Present Value of an Annuity What is the present value of a $600 annuity payment over 4 years if interest rates are 6 percent?
A)$475.26
B)$757.49
C)$2,079.06
D)$3,145.28

Question

Quizplus · Accepted Answer

To calculate the present value of an annuity, we can use the formula:

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

Where: 
PMT = Payment per period ($600) 
i = interest rate per period (6% / 12 months = 0.5% per month) 
n = total number of periods (4 years x 12 months = 48 months)

Plugging in the numbers, we get:

PV = $600 x [1 - (1+0.005)^-48] / 0.005 
PV = $2,079.06

Therefore, the best choice is C.

Present Value of an Annuity What Is the Present Value