Question

Payment of $670 are being made at the end of each month for 5 years at an interest of 8% compounded monthly. Calculate the present value?

Answer 1

Answer:

Payment of $670 are being made at the end of each month for 5 years at an interest of 8% compounded monthly. Calculate the present value?Payment of $670 are being made at the end of each month for 5 years at an interest of 8% compounded monthly. Calculate the present value?

Step-by-step explanation:

Answer 2

Answer:

$8292.29

Step-by-step explanation:

This is an annuity paid in arrears with;

Installment= $670

Periods= 5*12=60

Interest rate= 8%

The Present Value of a regular series of payments C, discounted using an interest rate i for n periods is;

$P.V=C*[\frac{1-(1+i)^{-n}}{i}]\\ P.V=670*[\frac{1-(1+0.08)^{-60}}{0.08}] \\ P.V=670*[\frac{1-(1.08)^{-60}}{0.08}]\\ P.V=670*12.37655182\\P.V=8292.289721$

Therefore the present value of this annuity is $8292.29 (rounded to two decimal places)