Find the present value of a 3-year, $20,000 ordinary annuity deposited into an account that pays 12 percent interest, compounded monthly. Solve for the present value of the annuity in the following ways:
a. As three single cash flows discounted at the stated rate of interest
b. As three single cash flows discounted at the appropriate effective rate of interest
c. As a 3-year annuity discounted at the effective rate of interest
This posting provides a detailed solution to the student's question.