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Present and future value tables of $1 at 3% are presented below:

-On January 1,2016,you are considering making an investment that will pay three annual payments of $10,000.The first payment is not expected until December 31,2018.You are eager to earn 3%.What is the present value of the investment on January 1,2016?
A)$26,662.
B)$27,462.
C)$28,286.
D)$29,135.

Question

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
 
-On January 1,2016,you are considering making an investment that will pay three annual payments of $10,000.The first payment is not expected until December 31,2018.You are eager to earn 3%.What is the present value of the investment on January 1,2016?
A)$26,662. 
B)$27,462. 
C)$28,286. 
D)$29,135.

Quizplus · Accepted Answer

The present value is calculated by discounting each payment back to January 1, 2016, using the formula PV = FV / (1 + r)^n. The payments occur at the end of 2018, 2019, and 2020, so n is 3, 4, and 5 respectively. The sum of these present values is approximately $26,662.

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