Question

Determine the present value of quarterly payments of $450 for 6 years at 7.5% annual interest, compounded quarterly. PV= R[(1+i)^-n]/i

Answer 1

Using it's formula, the present value of the amount is: $288.

What is the present value formula?

The present value formula is:

$PV = \frac{R}{(1 + r)^n}$

In which the parameters are:

• R is the future value.

• r is the interest rate.

• n is the number of periods.

Considering quarterly compounding, the parameters for this problem are as follows:

R = 450, r = 0.075/4 = 0.01875, n = 6 x 4 = 24.

Hence the present value is:

$PV = \frac{R}{(1 + r)^n}$

$PV = \frac{450}{(1.01875)^{24}}$

PV = $288

More can be learned about the present value formula at https://brainly.com/question/20813161

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