Q1: Payments of $ 670 are being made at the end of each month for 5 years at an interest of 8% compounded monthly. Calculate the Present Value.
Mathematics · Middle School · Mon Jan 18 2021
Answered on
Given:
Principal Amount ( P ) = $670 ( multiplied by 60 since it is stated that payments are made for each month and there is a total of 60 months in 5 years)
Term ( t ) = 5 years
Interest rate ( r ) = 8% or 0.08
Compounded monthly ( n ) = 5
Formula for compound interest:
A = P (1 + r/n)^nt
Solution:
Substitute the given values of the P, r, t and n to the formula for the compound interest.
A = (($670)(60))(1 + 0.08/12)^(5)(12)
A = (($670)(60))(1.0667)^60
A = ($40,200)(1.0667)^60
A = $1,931,339.763
Final answer:
A = $1,931,339.763