Question

We Pay Insurance Co. will pay you $1,500 each quarter for 29 years. You want to earn a minimum interest rate of 1.01 percent per quarter. What is the most you are willing to pay today for these payments

Answer 1

Solution and Explanation:

The period here is a quarter.

As per the given data in the question,

Rate = interest rate per period = 1.01 percent  

N per = 4 multiply with 29 = 116

PMT = 1500

FV = future value = 0

the most you are willing to pay today for these payments = - PV (Rate, Nper, PMT, FV) = -PV (1.01%, 116, 1500, 0)  

$\mathrm{PV}=\ 1,500\left[\left(1-1 / 1.0101^{116}\right) / 0.0101\right]$

PV = $102,223.18