Cosmos Touring wishes to replace its luxury bus in 10 years by accumulating funds in a special...

Question:

Value of an Annuity:

An annuity is a collection of equal cash flows paid each year into an account. An annuity deposited at the end of each year is an ordinary annuity. To estimate the value of an annuity, we apply the concept of the time value of money which states that a dollar today is worth more than a dollar in the future. The future value of an annuity is the amount expected in the account after the annuity has been compounded. We, therefore, need to know the interest rate applied, the future value, and the time period over which the annuity will be deposited

Answer and Explanation: 1