Question

Your rich aunt has promised to give you $2,000 per year at the end of each of the next four years to help you pay for college. Using a discount rate of 12%, the present value of the gift can be stated as:_______ A. PV = $2,000 (Annuity FV factor, i = 12%. n = 4). B. PV = $2,000 (Annuity PV factor, i = 12%, n = 4). C. PV = $2,000 (PV factor, i = 4%, n = 12). D. PV = $2,000 times 12% times 4.

Answer 1

B. (Annuity PV factor, I = 12%, n = 4) PV = $2,000

What Is an Annuity's Present Value Interest Factor?

When the periodic payment amount is multiplied by the present value interest factor of an annuity, the present value of a series of annuities can be calculated. The initial deposit accrues interest at the interest rate (r), which may be expressed as the following formula and perfectly finances a sequence of (n) successive withdrawals:

PVIFA is equal to (1 - (1 + r)n) / r.

Another factor used to calculate the present value of a typical annuity is PVIFA. A PVIFA table, which quickly displays the value of PVIFA, contains the most typical values for both n and r. This table is a very helpful tool for contrasting various scenarios with varied n and r values.

Learn more about the annuity PV factor with the help of the given link:

brainly.com/question/15432294

#SPJ4