Asked by Beatriz Sarai on Jun 09, 2024
Verified
The factor for the present value of an annuity at 8% for 10 years is 6.7101.This means that an annuity of ten $15,000 payments at 8% has a present value of $2,235.
Present Value
The contemporary valuation of an upcoming sum of money or cash flows over time, factoring in a designated rate of return.
Annuity
A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.
- Comprehend the core principles of present value calculations and how they apply to bond valuation and installment notes.
Verified Answer
TS
Tushar SharmaJun 14, 2024
Final Answer :
False
Explanation :
The present value of an annuity is calculated by multiplying the annuity payment by the present value factor. For an annuity of $15,000 payments at 8% for 10 years, the present value would be $15,000 * 6.7101 = $100,651.50, not $2,235.
Learning Objectives
- Comprehend the core principles of present value calculations and how they apply to bond valuation and installment notes.