Answer:
Maximum amount to be paid today =$91,590.66
Explanation:
Number of quarter in 30 years = 30 × 4 = 120
Number of payment = 120
The maximum amount to be paid is the present value of the series of payment discounted at rate of 0.91% per quarter
PV = A ×( 1- (1+r)^(-n))/n )
PV = 1250 × ( 1 - (1+0.0091)^(-120)/0.0091)
= 1250 × 73.2725
= $91,590.66
Maximum amount to be paid today =$91,590.66
Answer:
$91,043.14
Explanation:
Since this is a stream of income flow, the formula for calculating the present value of an ordinary annuity is the relevant formula to use and it is given as follows:
PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)
Where;
PV = Present value or the amount to pay today = ?
P = Quarterly payment = $1,250
r = interest rate = 0.91%, or 0.0091
n = number of quarters = 30 × 4 = 120
Substituting the values into equation (1), we have:
PV = 1,250 × [{1 - [1 ÷ (1+0.0091)]^120} ÷ 0.0091]
= 1,250 × 72.8345084286829
PV = $91,043.1355358536 = $91,043.14 approximately.
Therefore, most you are willing to pay today for these payments is $91,043.14 .
