What Is the Present Value of an Annuity of $100

question 106

Multiple Choice

What is the present value of an annuity of $100 received at the end of each year for seven years? The first payment will be received one year from today (round to nearest $10) .The discount rate is 13%.To solve this problem with a financial calculator, the correct choice is

• A) N=7, i=13, PMT= 100, FV=0, solve for PV
• B) N=7, i=13, PV= 100, FV=0, solve for FV
• C) N=7, i=13, PMT= 100, FV=100, solve for PV
• D) N=7, i=.13, PMT= 100, FV=0, solve for PV

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Definitions:

Allowance Method

An accounting technique that estimates and accounts for bad debts expense, reducing accounts receivable by a predicted amount of uncollectible accounts.

Outstanding Receivables

Amounts due to a company for goods or services that have been delivered or sold but not yet paid by customers.

Allowance for Doubtful Accounts

A contra asset account that reflects the estimated amount of accounts receivable that may not be collectible.

Notes Receivable

Written promises for amounts to be received by a business, usually detailing interest and the due date for repayment.