Question

The present value of an annuity represents: A. The coupon rate of an annuity contract B....

The present value of an annuity represents:

A. The coupon rate of an annuity contract

B. The discounted cash flow a series of payments

C. The total estimated value of future annuity payments adjusted for the interest rate

D. The current value of a future payment

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Answer #1

Answer-

D. The current value of a future payment

The present value of an annuity is the current value of future payments from an annuity, given a specified rate of return or discount rate. The annuity's future cash flows are discounted at the discount rate. Thus, the higher the discount rate, the lower the present value of the annuity.

The Present Value of Annuity applies a time value of money formula used for measuring the current value of a stream of equal payments at the end of future periods. This is also called discounting.

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