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

question 40

Multiple Choice

What is the present value of a four-year annuity of $100 per year that makes its first payment 2 years from today if the discount rate is 9%?

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

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Definitions:

Long-Term Bonds

Debt securities with a maturity of more than 10 years, offering periodic interest payments.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount loaned, payable to the lender at a specified rate over a given period.

Borrowing Directly

The process where individuals or entities obtain funding directly from lenders without intermediaries, typically through issuing bonds or obtaining loans.

Supplier of Funds

An entity, such as a bank or financial institution, that provides capital to individuals or businesses in the form of loans or investments.