Mike Carlson will receive $12,000 a year from the end of the third year to the end of the 12th year (10 payments). The discount rate is 10%. The present value today of this deferred annuity is ________.
A) $61,450
B) $42,185
C) $60,909
D) $55,379

Question

Quizplus · Accepted Answer

PV_A = A × PV_IFA(App. D: 10%, 10 periods) = $12,000 × 6.145 = $73,740 PV = FV × PV_IF(App. B: 10%, 2 periods) = $73,740 × 0.826 = $60,909

Mike Carlson Will Receive $12,000 a Year from the End