What is the present value of an annuity of $27 received at the beginning of each year for the next six years? The first payment will be received today, and the discount rate is 10% (round to nearest $10).
A) $120
B) $130
C) $100
D) $110

Question

Quizplus · Accepted Answer

The present value of an annuity due (first payment received today) can be calculated using the formula: $PV = Pmt \times \left(\frac{1 - (1 + r)^{-n}}{r}\right) \times (1+r)$, where Pmt is the payment amount, r is the discount rate, and n is the number of periods. Plugging in the values: $PV = 27 \times \left(\frac{1 - (1 + 0.10)^{-6}}{0.10}\right) \times (1+0.10)$, we get a present value of approximately $130 when rounded to the nearest $10.

What Is the Present Value of an Annuity of $27