The present value of $5,000 per year for three years at 12% compounded annually is $12,009.(PV of $1,FV of $1,PVA of $1,and FVA of $1)$\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

Question

Quizplus · Accepted Answer

To find the present value of an ordinary annuity, we use the formula:

PV = PMT x (1 - 1 / (1 + r)^n) / r

where PV is the present value, PMT is the payment per period, r is the interest rate per period, and n is the number of periods.

Plugging in the values given:

PV = $5,000 x (1 - 1 / (1 + 0.12)^3) / 0.12
PV = $12,009.05 (rounded to the nearest cent)

Therefore, the statement is true. We could also use the PVA factor from the appropriate table to find the same present value.

The Present Value of $5,000 Per Year for Three Years (Use appropriate factor(s)from the tables provided.)\bold{\text{(Use appropriate factor(s)from the tables provided.)}}(Use appropriate factor(s)from the tables provided.)

The Present Value of $5,000 Per Year for Three Years $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$