concept check: present value concepts\njustin investor wants to calculate how much money he needs to deposit…

concept check: present value concepts\njustin investor wants to calculate how much money he needs to deposit today into a savings account that earns 4% in order to be able to withdraw $6,000 at the end of each of the next five years. he should use which present - value concept?\na. present value of $1 for five periods\nb. present value of an annuity due of $1 for five periods\nc. present value of an ordinary annuity of $1 for five periods\nd. future value of $1 for five periods

concept check: present value concepts\njustin investor wants to calculate how much money he needs to deposit today into a savings account that earns 4% in order to be able to withdraw $6,000 at the end of each of the next five years. he should use which present - value concept?\na. present value of $1 for five periods\nb. present value of an annuity due of $1 for five periods\nc. present value of an ordinary annuity of $1 for five periods\nd. future value of $1 for five periods

Answer

Brief Explanations:

Justin wants to know the amount to deposit today to get equal - sized withdrawals at the end of each period for a fixed number of periods. An ordinary annuity is a series of equal payments made at the end of each period. Here, the withdrawals are made at the end of each year for five years. The present value of an ordinary annuity concept is used to calculate the present value of such a series of future cash - flows.

Answer:

C. Present value of an ordinary annuity of $1 for five periods