Question

What is the present worth of an equal quarterly payment series of $2,000 for six years, if the interest rate is 8% per year, compounded quarterly?

Answer 1

PV= $37,827.85

Step-by-step explanation:

Giving the following information:

Cf= $2,000 quarterly

Number of periods= 4*6= 24

i= 0.08/4= 0.02

To calculate the present worth, first, we need to determine the future value using the following formula:

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

A= annual deposit

FV= {2,000*[(1.02^24) - 1]} / 0.02

FV= $60,843.72

Now, the present value:

PV= FV/(1+i)^n

PV= 60,843.72/(1.02^24)

PV= $37,827.85