Question

It is reported that a 99-year license to use a parking spot at 42 Crosby in New York City is priced at $1 million. The licensee will have to cease using the parking spot thereafter. If the interest rate is fixed at 0.5% per month for the next 99 years, what is the fixed monthly payment on an equivalent 99-year mortgage to finance this purchase

Answer 1

$13.39

Step-by-step explanation:

future value of an annuity = monthly payment x FV annuity factor

monthly payment = future value / FV annuity factor

future value = $1,000,000

FV annuity factor = [(1 + 0.5%)¹¹⁸⁸ - 1 ] / 0.5% = 74,670.60843

monthly payment = $1,000,000 / 74,670.60843 = $13.39