Question

Determine the present Value annuity payments(the same amount each year) of 500$ over a period of 8 years which will earn 6% during the period.

a.$5000

b.$2450

c.$2550

d.$3105

Answer 1

Ans.	Option D   $3,105
	Present value of cash inflow = Annual cash inflows * Present value of an annuity of 1 of 12%
	$500 * 6.21
	$3,105
	*Calculation of Present value factor @ 6 %.
	Year		PV @ 6%
	1	1 / (1 + 0.06)^1	0.94
	2	1 / (1 + 0.06)^2	0.89
	3	1 / (1 + 0.06)^3	0.84
	4	1 / (1 + 0.06)^4	0.79
	5	1 / (1 + 0.06)^5	0.75
	6	1 / (1 + 0.06)^6	0.70
	7	1 / (1 + 0.06)^7	0.67
	8	1 / (1 + 0.06)^8	0.63
	Total of Pv of an annuity		6.21