2) You have an annuity of equal annual end-of-the-year cash flows of $500 that begin two years from today and last for a total of ten cash flows. Using a discount rate of 4%, what are those cash flows worth in today's dollars?

A) $3,899.47

B) $4,055.45

C) $4,380.24

D) $5,000.00

Answer:A

Explanation:A)

PV = PMT all divided by (1 + r)1 = $500 /(1.04)1= $3,899.47

MODE = END

INPUT102?-5000

KEYNI/YPVPMTFV

CPT3,899.47

Q:

I'm facing 3 issues with the above question:

1- Why did we use the interest rate as 2 instead of 4

2- I tried inputting the data in the financial calculator using I as 4 but I'm always getting $4,055.45

3- I tried the same data using I as 2 and I'm getting 4,491.29 not A) $3,899.47

Can someone please help with this?

Thank you,