What is the economic value today of 24 monthly payments of $500 with the first payment occurring 10 months from today? Assume that money can earn 12% compounded monthly.

A) $9,711.84
B) $8,973.34
C) $10,621.69
D) $9,615.68
E) $13,486.73

Question

Grant Wotalewicz · Accepted Answer

Final Answer : A, Explanation :  The economic value today is the present value of the annuity. First, calculate the present value of the annuity at the time of the first payment using the formula for the present value of an ordinary annuity. Then, discount this value back to today by dividing by (1 + 0.01)^10, where 0.01 is the monthly interest rate (12% annually compounded monthly).

What is the economic value today of 24 monthly payments of $500 with the first payment occurring 10 months from today? Assume that money can earn 12% compounded monthly.

A) $9,711.84
B) $8,973.34
C) $10,621.69
D) $9,615.68
E) $13,486.73

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Learning Objectives

Related questions

What is the economic value today of 24 monthly payments of $500 with the first payment occurring 10 months from today? Assume that money can earn 12% compounded monthly.A) $9,711.84B) $8,973.34C) $10,621.69D) $9,615.68E) $13,486.73

Definitions

Learning Objectives

Learning Objectives

Related questions

What is the economic value today of 24 monthly payments of $500 with the first payment occurring 10 months from today? Assume that money can earn 12% compounded monthly.

A) $9,711.84
B) $8,973.34
C) $10,621.69
D) $9,615.68
E) $13,486.73