PV = <u>$2,242.96</u>
The present value of an ordinary annuity of $500 a year for 6 years assuming an interest rate of 9% is<u> </u><u>$2,242.96</u>
<h3>What is the interest rate?</h3>
The fee that a lender assesses on a borrower is known as the interest rate, which is expressed as a percentage of the principal, or the loaned amount. Usually, the annual percentage rate (APR), which is how loans' interest rates are expressed, is noted (APR).
In its simplest form, interest is a charge imposed on the borrower for using a resource. Assets that have been lent include cash, goods, vehicles, and real estate. It is possible to think of higher interest rates as the "cost of money" because they make borrowing the same amount of money more expensive.
The majority of lending and borrowing transactions, therefore, involve interest rates. People take out loans to buy homes, finance initiatives, start or fund businesses, or cover college tuition. Businesses obtain loans to finance capital projects and grow their operations by acquiring long-term and fixed assets like real estate, buildings, and equipment. The repayment of borrowed funds can be made in one lump sum by a specific date or over the course of several payments.
Thus, $2,242.96 is the present value.
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