Question

. Terry purchases an annuity with payments made at the beginning of each month for 36 payments. The monthly payments are a constant amount of 15 per month for the first 24 payments. The 25th payment is 20, 26th is 25, the 27th payment is 30, and the arithmetic sequence continues for the rest of the payments. The nominal annual interest rate is 6% convertible monthly. What is the present value of the annuity

Answer 1

Answer:

The present value of the annuity is $ 825.02  

Explanation:

The present value of the annuity is the today's worth of the thirty annuity payments.

Each of the annuity payment is multiplied by its discount factor,for instance the discount factor for the first payment is computed thus

=$15*(1/(1+6%/12)^1=$14.93

The 6% interest rate is divided by 12 months to show a monthly rate of return find attached.

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