Question

What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%? Group of answer choices $18,367 $20,352 $16,576 $17,449 $19,334

Answer 1

Answer:

The PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5% is $20,352.

Step-by-step explanation:

P = PMT [(1 - (1 / (1 + r)$^{n}$)) / r]

= 2,700 [(1 - (1 / (1 + 0.055)$^{10}$)) / 0.05]

= 2,700 [(1 - (1 / (1 + 0.055)$^{10}$)) / 0.05]

= 2,700 [(1 - (1 / (1.708)) / 0.05]

= 2,700 [(1 - 0.58)) / 0.05]

= 2,700 [(0.41457) / 0.05]

= 2,700(7.53)

=$ 20,352