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What is the present value of $1,500 received for 24 months in arrears, followed by $1,200...

Question:

What is the present value of $1,500 received for 24 months in arrears, followed by $1,200 received for 36 months in arrears, if the annual discount rate appropriate is 9.25%?

a. $62,261

b. $13,984

c. $15,764

d. $64,022

Present Value of an Annuity:

An annuity is an equal amount of money that is paid or received over several periods. The present value of an annuity is calculated based on the principle of time value of money. The expected cash flows are discounted to their present day worth at the stated interest time over the time period of the investment.

Answer and Explanation: 1

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An annuity that occurs in arrears is an ordinary annuity and it is calculated using the formula;

  • {eq}Present \ Value \ of \ ordinary \ annuity =...

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How to Calculate the Present Value of an Annuity

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Chapter 8 / Lesson 3
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Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.


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