Question

How much would you pay today for an asset that pays $1,000 per month, for 12 months, starting today if the interest rate is 4% APR (compounded monthly)

Answer 1

Step-by-step explanation:

Present value of Annuity will be used for this as the future payments are given after equal intervals.

PV of an Annuity = C x [ (1 – (1+i)^-n) / i ]

Where,

C is the cash flow per period

i is the rate of interest

n is the frequency of payments

add given Values in the formula:

$1,000 x [ (1 – (1+4%)^-12) / 0.04 ]= $9387.5 is the Answer