What Is the Present Value of an Annuity Consisting of 5

question 45

Multiple Choice

What is the present value of an annuity consisting of 5 annual payments of $200 with an interest rate of 8% p.a.compounded annually and the first payment made immediately?

• A)$862.43
• B)$643.77
• C)$889.68
• D)$798.54

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Definitions:

Federal Open Market Committee

The branch of the Federal Reserve System responsible for overseeing the nation's open market operations and making key decisions about interest rates and the growth of the United States money supply.

Discount Rate

The interest rate charged by central banks on loans and advances to commercial banks and other financial institutions.

Reserve Requirements

Reserve requirements are central bank regulations that set the minimum amount of reserves that commercial banks must hold, either in their vaults or deposited with the central bank, as a percentage of their deposit liabilities.

Central Bank

An institution that manages a state's currency, money supply, and interest rates.