Question

Your parents are giving you $100 a month for four years while you are in college. At an 8% discount rate, what are these payments worth to you when you first start college?

Answer 1

Answer:

These payments worth to me when I first start my college are$4,303.

Explanation:

Monthly Payments = P = $100

Interest rate = i = 5.5% = 0.055 = 0.055/12 = 0.00458

Number of years = 4 years

Period in a year = 12 months

Number of total periods = n = 4 x 12 = 48 periods

APV = P [  1 - ((( 1 + i )^-n ) / i)]

APV = 100 [  (1 - (( 1 + 0.00458 )^-48 ) / 0.00458)]

Annuity present value  = $4,303