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Svetlanka [38]
2 years ago
5

You are offered a series of monthly payments of $10, continuing forever. If you deposit these at a nominal interest rate of 12%,

compounded monthly, what is the present worth of the series?
a. $120
b. $1000
c. $1200
d. $1500
e. Infinite
Business
1 answer:
OlgaM077 [116]2 years ago
5 0

Answer:

Present value will be equal to $1000

So option (B) will be correct answer

Explanation:

We have given monthly payment of $10

Annual rate of interest r = 12%

As we know that 1 year = 12 month

So monthly interest will be equal to =\frac{12}{12}=1 % = 0.01

We have to find the present value

Present value will be equal to ratio of monthly payment to rate of interest

So present value will be equal to

Present value =\frac{monthly\ payment}{monthly\ interest}=\frac{10}{0.01}=1000 $

So present value will be $1000

So option (B) will be correct answer

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