Present Value of an Annuity

Determine the present value of $200,000 to be received at the end of each of four years, using an interest rate of 7%, compounded annually, as follows:

a. By successive computations, using the present value table in Exhibit 8. Round to the nearest whole dollar.

First year	$________
Second Year	$________
Third Year	$________
Fourth Year	$________
Total present value	$________

b. By using the present value table in Exhibit 10. Round to the nearest whole dollar. $________

c. Why is the present value of the four $200,000 cash receipts less than the $800,000 to be received in the future? The present value is less due to a. inflation b. the compounding of interest c. deflation over the 4 years.