Question

Carol expects to receive $1,000 at the end of each year for 5 years. The annuity has an interest rate of 10%. The present value of this annuity at Time Zero, the inception of the annuity (rounded to the nearest dollar) is?

Answer 1

$3,791

Step-by-step explanation:

Given that

Expected amount received = $1,000

Number of years = 10 years

Rate of interest = 5

So, the present value of this annuity would be

= Expected amount received × PVIFA factor at 5 years at 10%

= $1,000 × 3.7908

= $3,791

Refer to the PVIFA table

Simply we multiplied the expected amount received by the PVIFA factor