What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%? a. $16,576 b. $19,334 c. $18,367 d. $17,449 e. $20,352

The correct answer is E.

Explanation:

Giving the following information:

Ordinary annuity with 10 payments of $2,700. The interest rate is 5.5%.

First, we need to calculate the final value using the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual pay

FV = {2,700*[ (1.055^10) - 1]}/0.055 = $34,763.45

Now, we can calculate the present value:

PV = FV / (1+i) ^n

PV = 34,763.45 / (1.055^10) = 20,352