What formula calculates the present value of an annuity of $1,000 starting one year from now?

The formula used to calculate the present value of an annuity provides a way to determine how much a series of future cash flows is worth today. The correct choice reflects this principle, utilizing the concept of discounting future payments back to their present value.

In this case, the present value of an annuity starting one year from now involves a consistent cash flow of $1,000 received over a specified period with a particular discount rate. The formula for calculating the present value of an annuity is derived from taking the cash inflow, dividing it by the discount rate, and adjusting it for each period involved. This can be represented as:

[ PV = C \times \left(1 - (1 + r)^{-n}\right) / r ]

Where:

• ( PV ) is the present value,

• ( C ) is the cash inflow per period ($1,000),

• ( r ) is the discount rate (0.07 in this context or 7%),

• ( n ) is the number of periods.

While the value presented in option D contains extra terms like (7%-3%), which are typically not part of the standard present value annuity calculation, it reflects the application of the