The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is
A) $288
B) $1,896.
C) $1,750.
D) $1,558.

Question

Quizplus · Accepted Answer

Using the present value of an ordinary annuity formula, PV = C * ((1 - (1+r)^(-n))/r), where C is the annual payment, r is the interest rate, and n is the number of payments, we can calculate the present value of the annuity to be PV = $350 * ((1 - (1+0.04)^(-5))/0.04) = $1,558. Therefore, the best choice is D, which matches this calculated value.

The Present Value of an Ordinary Annuity of $350 Each