If the present value of an ordinary, 8-year annuity is $12,500 and interest rates are 9.1 percent, what is the present value of the same annuity due?
A) $13,637.50
B) $13,941.90
C) $14,114.80
D) $14,211.90

Question

Quizplus · Accepted Answer

The present value of an annuity due is equal to the present value of an ordinary annuity multiplied by (1 + r), where r is the interest rate. In this case, the present value of an ordinary annuity is $12,500 and the interest rate is 9.1 percent, so the present value of the annuity due is $12,500 * (1 + 0.091) = $13,637.50.

If the Present Value of an Ordinary, 8-Year Annuity Is