Calculate present value of the annuity

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Reference no: EM131954016

1. A court settlement awarded an accident victim four payments of $75,000 to be paid at the end of each of the next four years. Using a discount rate of 4%, calculate the present value of the annuity.

a. $278,495

b. $281,495

c. $300,000

d. $272,242

e. $284,095

2. The Bluebird Company has a $12,000 liability it must pay three years from today. The company is opening a savings account so that the entire amount will be available when this debt needs to be paid. The plan is to make an initial deposit today and then deposit an additional $3,500 a year for the next three years, starting one year from today. The account pays a 3% rate of return. How much does the Bluebird Company need to deposit today?

a. $1,642.28

b. $867.74

c. $1,276.34

d. $1,108.09

e. $1,081.56

Please show work.

Reference no: EM131954016

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