Tom jones expects to receive 1000 at the end of each year fo

Tom jones expects to receive $1000 at the end of each year for the next two years. Assuming an annual compound interest rate of .12 what is the present value of these two annual payments? .7972

A. $1690

B. $1736

C. $1833

D. $1782

show me the steps on how to get the answer

Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$1000[1-(1.12)^-2]/0.12

=$1000*1.69005102

=$1690(Approx).