Question

What is the present value of an annuity due that makes 5 payments of $6,000 each if the interest rate is 7%?

a. $20,323.27

b. $24,601.18

c. $26,323.27

d. $28,001.22

e. $28,599.24

Answer 1

Present Value of Annuity Due = Amount/(1+rate)^0 + Amount/(1+rate)^1 + Amount/(1+rate)^2 + Amount/(1+rate)^3 + Amount/(1+rate)^(n-1)

n = 5

Amount = 6000

Rate =7%

Present Value of Annuity Due = 6000/(1+0.07)^0 + 6000/(1+0.07)^1 +6000/(1+0.07)^2 +6000/(1+0.07)^3 +6000/(1+0.07)^4

= $26323.27 Answer

The option C is correct.