What's the present value today of $1 a year received for each 4 years? Suppose the...

Question

Question

What's the present value today of $1 a year received for each 4 years? Suppose the interest rate is 9%.

Multiple Choice

$2.53

$3.24

$3.89

$3.39

Answer 1

Answer #1

Answer : $ 3.24

Present value of annuity = Annuity x [ { 1 - ( 1 / 1 + r ) ⁿ } / r ]

Present value of annuity of $1 = $ 1 x [ { 1 - (1 / 1.09) ⁴ } / 0.09 ] = $ 3.2397, rounded off to $ 3.24

Answer 2

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