What Is the Present Value of a Four-Year Annuity of $100

question 46

Multiple Choice

What is the present value of a four-year annuity of $100 per year that begins 2 years from today (end of year 1) if the discount rate is 9%?

• A)$297.22
• B)$323.97
• C)$356.85
• D)$272.68

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Definitions:

Explicit Costs

Directly incurred expenses in the operation of a business, such as wages, rent, and material costs, which are clearly accounted for and easy to identify.

Opportunity Costs

The potential benefits missed out on when choosing one alternative over another.

Explicit Costs

Direct, out-of-pocket payments for goods or services that are made by a business as part of its operations.

Total Economic Costs

The sum of all costs associated with the production of a good or service, including both explicit (direct) costs and implicit (indirect or opportunity) costs.