You expect to receive annual gifts of $1,000 at the end of Years 1 and 2 and $1,500 at the end of Years 3 and 4. What is the correct present value of multiple annuities formula if the rate is 6 percent?

PV of annuities = $3,021.53

Explanation:

The present value of the annuity would be as follows;

First annuity of $1000:

PV = A * (1 - (1+r) ^ (-n) / r

PV = Present Value, r - rate of return, n-number of years

PV = 1000 * (1 - (1.06) ^ (-2)

PV = $1,833.39

The second annuity

PV = 1,500 x (1-1.06^ (-2) * 1.06^ (-2) = 1,188.140

PV = $1,188.140

PV of the annuities = $1,833.39 + $1,188.140 = $3,021.53

PV of annuities = $3,021.53