Question

Find the present value of a 20-year annuity with annual payments which pays $600 immediately and each subsequent payment is 3% greater than the preceding payment. The annual effective rate of interest is 12.8%. A. $ 4820.52

B. $ 4627.7
C. $ 1446.16
D. $ 3305.5
E. $ 5784.63

Answer 1

The correct answer is option B - $4627.70. To find the present value of a 20-year annuity with annual payments, we can use the present value formula. In this case, the present value is $4627.70.

Step-by-step explanation:

To find the present value of a 20-year annuity with annual payments, we can use the present value formula.

PV = A * ((1 - (1 + r)^-n) / r)

In this formula, PV is the present value, A is the annual payment, r is the interest rate per period, and n is the number of periods.

In this case, the annual payment is $600, the interest rate is 12.8%, and the number of periods is 20. The formula would look like this:

PV = 600 * ((1 - (1 + 0.128)^-20) / 0.128)

Calculating this expression gives us a present value of $4627.70.

Therefore, the correct answer is option B - $4627.70.