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You are to receive $12,000 at the end of each of five years. The available yield...

You are to receive $12,000 at the end of each of five years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

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Answer #1

Answer:

As the requirement is to arrive at Present value of an ordinary annuity, the table you would use is

"Present Value Factors for a One-Dollar Annuity discounted at k Percent for n Periods"

Here:

Annuity = $12,000

Discount rate = 6%

Number of periods = 5 years

From table we find present value of one dollar annuity discounted at 6% for 5 years is = 4.21236

Hence Present value = 12000 * 4.21236

= $50548.32

= $50548 (rounded off)

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