What's the Present Value of a 4-Year Ordinary Annuity of $2,250

question 12

Multiple Choice

What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $2,400 at the end of Year 4 if the interest rate is 5%?

• A) $7,464.66
• B) $9,952.87
• C) $8,858.06
• D) $12,341.56
• E) $10,848.63

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Definitions:

Deferred Annuity

A financial agreement which postpones the disbursement of income, periodic payments, or a one-time amount until chosen by the investor to be received.

Ordinary Annuity

Equal financial transactions executed at the close of each interval across a specific period.

Deferred Annuity

An insurance product that provides future payments to the holder, typically starting after a designated period.

Ordinary Annuity

Repetitive uniform payments that are conducted after each term within a set timeframe.