Question

Q1: Payments 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:

The present value is $ 27365.55

Step-by-step explanation:

Given as :

The amount at end of each month = $ 670

So, The amount for 5 years = 12 × 5 × $ 670 = $ 40200

The rate of interest compounded monthly = 8%

Let The Present value or Principal = P

So, from compounded method

Amount = principal × $(1+\frac{Rate}{100})^{Time}$

Or, $ 40200 = P × $(1+\frac{8}{100})^{5}$

Or, $ 40200 = P × $(1.08)^{5}$

or, $ 40200 = P × 1.469

∴  P = $\frac{40200}{1.469}$

I.e P = $ 27365.55

Hence The present value is $ 27365.55   Answer