Question

What is the present value of $1,200 to be received at the end of each month for 5 years if the discount rate is 6%?

a. $62,071.b. $62,381.c. $63,095.d. $63,274.

Answer 1

PV= $62,070.67 = $62,071

Step-by-step explanation:

Giving the following information:

Monthly payment= $1,200

Number of months= 5*12* 60

Discount rate= 0.06/12= 0.005

To calculate the present value, we need to use the following formula:

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

A= monthly payment

PV= 1,200*{(1/0.005) - 1 / [0.005*(1.005^60)]}

PV= $62,070.67