Question

Compute the present value of an ordinary annuity that pays $13,000 per year for 15 years at 10%.
Present value of annuity of $1:
7% 8% 9% 10% 12%
11 7.499 7.139 6.805 6.495 5.938
12 7.943 7.536 7.161 6.814 6.194
13 8.358 7.904 7.487 7.103 6.424
14 8.745 8.244 7.786 7.367 6.628
15 9.108 8.559 8.061 7.606 6.811
A) $98,878
B) $99,745
C) $97,578
D) $100,178

Answer 1

Answer:

option (a) $98,878

Explanation:

Given:

Annuity = $13,000

Time = 15 years

Rate = 10%

now,

Present value = Annuity × ( Annuity factor for 15 year and rate 10% )

from the table the annuity factor can be found out by using the table provided in the question

pointing to the value common in the row of 15 and column of 10% i.e (7.606)

thus,

or

Present value = $13,000 × ( 7.606 )

or

Present value = $98,878

hence the correct answer is option (a) $98,878