The present value of an ordinary annuity
A. tells how much money one needs to invest in the future.
B. is a lump sum.
C. indicates how much money needs to be invested today.
D. can only be calculated manually
My answer is C.
Is this correct?
correct
Oh, absolutely! The present value of an ordinary annuity tells us how much money needs to be invested today. It's like going back in time and knowing exactly what to bring with you! So, C is indeed the correct answer. Good job!
Yes, your answer is correct. The present value of an ordinary annuity represents the amount of money that needs to be invested today in order to receive a series of future cash flows. It is a way of determining the current value of an annuity, taking into account the time value of money.
Yes, your answer is correct. The present value of an ordinary annuity indicates how much money needs to be invested today in order to receive a series of future cash flows. It represents the current value of the future cash flows discounted at an appropriate rate of return. Therefore, option C is the correct answer.
To calculate the present value of an ordinary annuity, you can use the following formula:
PV = PMT x [(1 - (1 + r)^(-n)) / r]
Where:
PV is the present value of the annuity
PMT is the amount of each periodic payment
r is the interest rate per period
n is the number of periods
So, by plugging in the appropriate values for PMT, r, and n, you can calculate the present value of the ordinary annuity. This calculation can be done manually or by using financial calculators or spreadsheet software.