Use this information to answer the following question.

-What is the present value of receiving $800 at the end of each year for three years,assuming an APR of 7 percent?
A)$652.80
B)$1,952.40
C)$2,099.20
D)$2,244.00

Question

Use this information to answer the following question.

-What is the present value of receiving $800 at the end of each year for three years,assuming an APR of 7 percent?
A)$652.80 
B)$1,952.40 
C)$2,099.20 
D)$2,244.00

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we need to use the formula:

PV = CF/(1+r)^n

where PV is the present value, CF is the cash flow, r is the annual percentage rate (APR), and n is the number of years.

Using this formula, we can calculate the present value of each cash flow:

PV1 = 800/(1+0.07)^1 = 747.66 
PV2 = 800/(1+0.07)^2 = 698.50 
PV3 = 800/(1+0.07)^3 = 652.80

The total present value is the sum of the individual present values:

PV = PV1 + PV2 + PV3 = 747.66 + 698.50 + 652.80 = 2,099.20

Therefore, the best choice is C, $2,099.20.

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