An annuity is set up that will pay $1,600 per year for ten years. What is the present value (PV) of this annuity given that the discount rate is 9%?
a. $6,161
b. $12,322
c. $10,268
d. $14,375
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=1600[1-(1.09)^-10]/0.09
=1600*6.4176577
=$10,268(Approx).
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