Consider a three-year annuity which pays 100 AUD every year. The market interest rate is 10%. Calculate the duration of the annuity. Select one: a. 194 b. 1.94 c. 364 d. 3.64 e. None of the other answers is correct.
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The formula for the present value of an annuity is: PV = C * (1 - (1 + r)^-n) / r Where PV is the present value, C is the cash flow per period, r is the interest rate, and n is the number of periods. In this case, C = 100 AUD, r = 10% (or 0.1), and n = 3. PV = Show more…
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