Question

what is the present value of $3,000 reeived at the end of each month for three years if money earns 12 percent compounded monthly?

Answer 1

The present value of the sum after 3 years is $90,322.52

We will have to use formula for the present value of an annuity to solve the present value of $3,000 received at the end of each month for three years.

`PV = PMT * [(1 - (1 + r)^(-n)) / r]`

PMT = $3,000

r = 12%/12 = 0.01

n = = 3*12= 36 months

PV = $3,000 * [(1 - (1 + 0.01)^(-36)) / 0.01]

= $3,000 * 0.30107505037/0.01

= $3,000 * 30.107505037

= $90,322.5151

= $90,322.52.