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what is the pv of an ordinary annuity with 8 annual payments of $6,980 if the appropriate interest rate is 4%?

User Jaryd
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1 Answer

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Final answer:

To find the present value of an ordinary annuity with 8 annual payments of $6,980 at a 4% interest rate, you use the present value of an ordinary annuity formula, substituting the given values into the formula to calculate the present value.

Step-by-step explanation:

To calculate the present value (PV) of an ordinary annuity with 8 annual payments of $6,980 at an interest rate of 4%, we can use the present value of an ordinary annuity formula:

PV = PMT × [(1 - (1 + r)^-n) / r]

Where:

PMT = Periodic payment ($6,980)

r = Periodic interest rate (0.04 for 4%)

n = Number of periods (8)

Using the formula, we calculate the PV as follows:

PV = $6,980 × [(1 - (1 + 0.04)^-8) / 0.04]

After calculating the above expression, you will find the present value of the annuity.

Note that the given information related to other financial calculations such as a $12,000 annuity for 30 years, a 15 year student loan, and a two-year bond are not directly relevant to solving this particular question.

User Dryadwoods
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