Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of the next three years. This annuity has an annual rate of return of 7%. Given this information, what is the present value today of this annuity?

Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of the next three years. This annuity has an annual rate of return of 7%. Given this information, what is the present value today of this annuity?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Bill is the owner of an ordinary annuity that will pay him $12,000 at the end of each of the next three years. This annuity has an annual rate of return of 7%. Given this information, what is the present value today of this annuity?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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