Monthly payment of $50, an interest rate of 5%, and a term of 3 years (12 months per year), the present value of the annuity is approximately $383.93.
Plugging in the values you provided into the formula gives:
P = $50 * (1 - (1 + 0.05)^(-12)) / (0.05 * (1 + 0.05)^12)
Now, let's use your preferred calculator to evaluate the expression:
Key in 50.
Press the subtraction (-) key.
Press the "1" key followed by the opening parenthesis "(".
Press the "1" key again, then "+" followed by "0.05" raised to the power of "(-12)" using the exponent key (usually ^).
Close the parentheses ")".
Divide the entire expression by "0.05 * (1 + 0.05)^12".
Press the "=" key.
The calculated present value, rounded to the nearest cent, is approximately $383.93.
Therefore, for a monthly payment of $50, an interest rate of 5%, and a term of 3 years (12 months per year), the present value of the annuity is approximately $383.93.
Question
Use a calculator to evaluate the present value of an annuity formula P = m 1 − 1 + r n −nt r n for the values of the variables m, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $50; 5%; 3 yr