What Is the Present Value of a Five-Period Annuity of $3,000

question 61

Multiple Choice

What is the present value of a five-period annuity of $3,000 if the interest rate is 12% and the first payment is made today?

• A) $9,655.65
• B) $10,814.33
• C) $12,112.05
• D) $13,200.00

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Definitions:

Net-of-Tax Interest Expense

The interest expense after considering the effects of income tax, representing the actual cost of borrowing to the entity.

GAAP

Generally Accepted Accounting Principles; the standard framework of guidelines for financial accounting used in any given jurisdiction, including the rules and standards for financial reporting.

Fair Value

The approximate value for which an asset or liability might be traded between informed, willing participants in a fair deal.

Grant Date

The date on which an employee is given the option to purchase stock at a set price.