Question

You have just signed a contract for your rental property and you will make monthly payments at the beginning of each month. Your monthly payments is $1000 and the monthly rate is 4% per month. Calculate the present value of your rental payments for the first year.

Answer 1

Answer:

$9,760.48

Explanation:

Present value of annuity due = P* [[1 - (1+r)^-(n-1)] / r] + P. Where P = Periodic payment = $1,000, r = Rate of interest per period 4% (0.48/12), n = number of payments 12 (12*1)

Present value of annuity = $1000 * [[1 - (1 + 0.04)^-(12-1)] / 0.04] + $1000

Present value of annuity = $1000*8.760475 + $1000

Present value of annuity = $8760.48 + $1000

Present value of annuity = $9,760.48