The Present Value of an Annuity Factor for Six Years

question 149

True/False

The present value of an annuity factor for six years at 10% is 4.3553.This means that the present value of an annuity of six annual $2,000 payments at 10% would equal $8,711.

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Definitions:

Amortize

This refers to the process of gradually writing off the initial cost of an asset over a period.

Discount

A reduction applied to the regular price of goods or services, or the amount by which the market value of a bond falls below its par value.

Premium

The amount by which the price of something exceeds its principal or nominal value, often applied to bonds, insurance policies, and preferred stock.

Forward Contract

A personalized agreement between two entities to purchase or sell a specific asset at a predetermined price on a later date.