Calculate the Present Value of an Ordinary Annuity Consisting of Payments

question 158

Multiple Choice

Calculate the present value of an ordinary annuity consisting of payments of $5,000 each, made at the end of every three months for six years. Assume that money is worth 7.2% compounded quarterly.

• A) $46,070
• B) $76,295
• C) $96,748
• D) $105,186
• E) $122,517

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Definitions:

Opportunity Costs

The cost of missing out on the next best alternative when making a decision.

Cash Balance

The amount of cash a company has available at any given time, including bank balances and cash on hand.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision. It represents the benefits that could have been received but were given up to take another course of action.

Cash Balance

The amount of cash a company or individual has available at any given time, reflecting liquidity.