Answer:
A. $2,170.39
Explanation:
First, we understand that what we are dealing with is Ordinary annuity which represents payments received at the end of each year
As such, The Present value of Ordinary annuity is calculated using the following formula
= Annuity amount x (1-(1+r)∧-n ) /r
Plugging this formula into the schedule given in the question ew have teh following
First, the present value of the payments received at the end of each year
= $3,600 x (1- (1.08∧-12) / 0.10
= $27,129.88
Secondly, the present valueof the payments received at the beginning of each year
= = $3,600 x (1- (1.08∧-11) / 0.10
= $25,700.27 + $3,600 (the amont recieved today)
Total PV = $29,300.27
Finally, find the difference between the PV of cash flow received at the beginning and PV of Cash flow received at the end=
= $29,300.27- $27,129.88
= $2,170.39
