Respuesta :
Answer: The correct answer is choice c - 3.7908
Explanation: The formula to calculate the annuity present value factor is:
(1-(1+r) ^-n ) / rate
Using the information from the problem, r equals the rate, which is .1 and n equals the number of periods, which is 5.
Now, putting the information into the formula:
(1 - (1 + .1) ^-5) / .1 = Present value annuity factor
3.7908 = Present value annuity factor
The present value factor for an annuity of five periods would be 3.7908
What is the calculation of the present value factor?
The rate of interest is given as 10 percent which would be 0.1.
The following formula would give the present value;
[tex]\frac{1-(1+r)^{-n} }{r} \\\\=\frac{1-(1+0.1)^{-5} }{10.} \\=3.7908[/tex]
Here, r is the rate of interest and n is the number of years.
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