Question

a series of equal quarterly reciepts of 1000 extends over a period of 5 years. What is the present worth of this quarterly payment series at 8% interest, compouided continuously

Answer 1

$16,320 to the nearest dollar amount

Step-by-step explanation:

The annual effective rate is computed thus:

effective annual rate=e^(r/t)-1

e= 2.718

r=8%

t=number of payments per year=4

effective quarterly rate=2.718^(8%/4)-1

=2.718^(8%/4)-1=2.01992%

The present value of the quarterly receipts can be determined using a financial calculator whereby the calculator is set to its default end mode:

N=20(number of quarterly receipts in 5 years=5*4)

I/Y=2.01992(quarterly interest rate)

PMT=1000

FV=0(after 5 years the number of quarterly payments outstanding would be nil)

CPT

PV=$16,320.04