Question

What is the present value of 1,400 per year annually at the end of years 25 to 43 if the interest rate is 7%

14,082.72

13,759.64

14,469.83

2,852.68

2,594.73

Answer 1

PV of Annuity:

Annuity is series of cash flows that are deposited at regular intervals for specific period of time.

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r

r - Int rate per Years

n - No. of Years

PV of Annuity
Particulars	Amount
Cash Flow	$      1,400.00
Int Rate	7.000%
Periods	18

Periods = 43-25 = 18

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
= $ 1400 * [ 1 - [(1+0.07)^-18]] /0.07
= $ 1400 * [ 1 - [(1.07)^-18]] /0.07
= $ 1400 * [ 1 - [0.2959]] /0.07
= $ 1400 * [0.7041]] /0.07
$                14,082.72

First option has to be selected