What is the present value of an annuity of $12 received at the end of each year for seven years? Assume a discount rate of 11%.The first payment will be received one year from today (round to nearest $1).
A) $25
B) $40
C) $57
D) $118

Question

Quizplus · Accepted Answer

Using the formula for the present value of an annuity, we have:

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

where PV is the present value, A is the amount of each payment, r is the discount rate, and n is the number of payments.

Substituting the given values, we get:

PV = 12 * ((1 - (1 + 0.11)^-7) / 0.11)
PV = 57.05

Rounding to the nearest dollar, we get the answer of $57, which is choice (C).

What Is the Present Value of an Annuity of $12