Question

Tomac Swim Club bought electronic timing equipment on a contract

requiring monthly payments of $725 for three years beginning
eighteen months after the date of purchase. What was the cash value
of the Purchase?

Answer 1

To find the cash value of the purchase, we need to calculate the present value of the monthly payments. However, the question does not provide the annual interest rate, which is necessary to make this calculation.

Step-by-step explanation:

To find the cash value of the purchase, we need to calculate the present value of the monthly payments. We know that monthly payments are $725 for three years, but they start eighteen months after the date of purchase. So, the total number of payments is 3 years * 12 months – 18 months = 30 months.

Now, to calculate the present value, we use the formula for the present value of an ordinary annuity: PV = P * (1 – (1 + r)⁻ᴺ) / r, where P is the payment amount, r is the interest rate per period, and N is the number of periods. In this case, P = $725, r = the interest rate per month, and N = 30.

To calculate the interest rate per month, we need to use the formula: r = (1 + i)^(1/12) – 1, where i is the annual interest rate. We don't have the annual interest rate given in the question, so we cannot fully calculate the cash value of the purchase without that information.