An annuity is set up that will pay $1,500 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 9%? ..... O A. $8,993 O B. $10,792 O C. $5,396 O D. $12,590
An annuity is set up that will pay $1,500 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 9%? ..... O A. $8,993 O B. $10,792 O C. $5,396 O D. $12,590
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![**Question:**
An annuity is set up that will pay $1,500 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 9%?
**Options:**
- A. $8,993
- B. $10,792
- C. $5,396
- D. $12,590
*Note:* To calculate the present value of an annuity, you can use the formula:
\[ PV = P \times \frac{{1 - (1 + r)^{-n}}}{r} \]
where \( P \) is the annual payment ($1,500), \( r \) is the discount rate (9% or 0.09), and \( n \) is the number of years (9).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb6ea49f2-aec0-47e4-ae21-0e0a47907cd1%2Fa82158b1-a80f-47e5-8b0d-d336ca33b51f%2Fs2ngjde_processed.png&w=3840&q=75)
Transcribed Image Text:**Question:**
An annuity is set up that will pay $1,500 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 9%?
**Options:**
- A. $8,993
- B. $10,792
- C. $5,396
- D. $12,590
*Note:* To calculate the present value of an annuity, you can use the formula:
\[ PV = P \times \frac{{1 - (1 + r)^{-n}}}{r} \]
where \( P \) is the annual payment ($1,500), \( r \) is the discount rate (9% or 0.09), and \( n \) is the number of years (9).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education