If the Present Value of an Ordinary, 10-Year Annuity Is

question 93

Multiple Choice

If the present value of an ordinary, 10-year annuity is $25,000 and interest rates are 7 percent, what is the present value of the same annuity due?

• A) $23,644.49
• B) $24,997.51
• C) $25,000.00
• D) $26,750.00

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Definitions:

Compounded Monthly

Interest on an investment calculated each month on the principal and previously earned interest.

Equivalent Amount

A sum of money that is equal in value to a different amount in another currency or under different conditions.

Present Value

The current value of a future amount of money or stream of cash flows, discounted at a particular interest rate.

Compounded Quarterly

A method of calculating interest where the interest is added to the principal four times a year, resulting in the interest from one quarter earning interest in the next.