The Formula for Calculating the Present Value Factor for an Annuity

question 103

Multiple Choice

The formula for calculating the present value factor for an annuity of $1 is

• A) Amount to be invested / Annual average net income
• B) Annual net cash flow / Amount to be invested
• C) Annual average net income / Amount to be invested
• D) Amount to be invested / Equal annual net cash flows

---

Definitions:

Commonsense Notions

Widely held beliefs or judgments that are seen as innate to human cognition without the need for detailed empirical evidence.

Bureaucracies

Organizational structures that manage large-scale public and private operations, characterized by a hierarchical arrangement, a division of labor, and a set of formal rules and procedures.

Formal Organization

An organization structured with fixed rules and regulations, clearly defined roles and responsibilities, and a hierarchical authority system.

Reference Group

A group that individuals compare themselves to for the purpose of evaluating their behaviors, attitudes, and norms.