Final answer:
The present value of an ordinary annuity is calculated using a specific formula involving the annual payment, the interest rate, and the number of payments. With an annual payment of $10,000, a 6% interest rate, and 5 payments, you can use the PV annuity formula to find the correct PV.
Step-by-step explanation:
The present value (PV) of an ordinary annuity can be calculated using the formula for the present value of an annuity:
PV = C x [1 - (1 + r)^-n] / r
Where C is the annual payment, r is the annual interest rate, and n is the number of payments.
Using the given values:
- C = $10,000 (Annual Payment)
- r = 0.06 (6% Annual Interest Rate)
- n = 5 (Number of Payments)
Let's calculate the present value:
PV = $10,000 x [1 - (1 + 0.06)^-5] / 0.06
After solving, you would get the present value of the ordinary annuity. The correct answer should match one of the options provided in the multiple-choice question, which can be calculated using a financial calculator or spreadsheet software.