If the Present Value of an Ordinary, 4-Year Annuity Is

question 83

Multiple Choice

If the present value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the present value of the same annuity due?

• A) $943.40
• B) $1,000.00
• C) $1,040.00
• D) $1,060.00

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Definitions:

Number of Periods

A figure representing the count of time intervals, such as months or years, in various financial calculations.

Compounded Annually

Refers to the process whereby the interest earned on an investment is added to the principal at the end of each year, and the following year's interest calculation includes the added interest from the previous year.

Annual Interest Rate

The percentage of principal charged by the lender for the use of its money expressed as an annual rate.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.