Question

with a monthly annuity payment of $150, a 14 percent apr, and a payment plan spanning 5 years, what is the present value of the annuity? round your answer to the nearest hundredth.(1 point) responses $5,225.24 $5,225.24 $7,326.67 $7,326.67 $4,325.15 $4,325.15 $6,446.55 $6,446.55

Answer 1

[AI-generated answer — Bot GPT 3.5]

To calculate the present value of the annuity, we can use the formula for the present value of an ordinary annuity:

PV = PMT * [1 - (1 + r)^(-n)] / r

Where:
PV = Present Value
PMT = Monthly annuity payment = $150
r = Monthly interest rate = 14% / 12 = 1.1666% or 0.11666
n = Number of payments = 5 years * 12 months = 60

Plugging the values into the formula:

PV = $150 * [1 - (1 + 0.11666)^(-60)] / 0.11666
PV = $150 * [1 - (1.11666)^(-60)] / 0.11666
PV = $150 * [1 - 0.23098] / 0.11666
PV = $150 * 0.76902 / 0.11666
PV = $113.45 / 0.11666
PV = $9717.46

Therefore, the present value of the annuity is approximately $9,717.46.