If you start making $115 monthly contributions today and continue them for six years, what is their present value if the compounding rate is 12 percent APR? What is the present value of this annuity?
A) $5,512.90
B) $5,633.10
C) $5,882.30
D) $5,941.12

Question

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula PV = P * [(1 - (1 + r)^-n) / r], where P is the payment amount, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments. For this problem, P = $115, r = 0.12/12 = 0.01, and n = 6*12 = 72. Plugging these values into the formula gives PV = $115 * [(1 - (1 + 0.01)^-72) / 0.01] = $5,941.12.

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