You are to receive $12,000 at the end of each of five years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
A) Present value of an annuity of $1
B) Future value of an annuity of $1
C) Present value of $1
D) Future value of $1

Question

Quizplus · Accepted Answer

The present value of an annuity of $1 table is used to determine the value of a series of equal payments or receipts made at regular intervals. In this case, the $12,000 payments that will be received at the end of each of the five years can be considered an annuity. By using the PV of an annuity of $1 table and applying it to the $12,000 payments, we can determine the present value of those payments today.

You Are to Receive $12,000 at the End of Each