Suppose the interest rate is 10.1% APR with monthly compounding.What is the present value of...

Suppose the interest rate is 10.1% APR with monthly compounding. What is the present value of an annuity that pays $83 every 6 months for 7 years?

The 6-month effective interest rate is ___%. (Round to three decimal places.)

The present value is $___. (Round to the nearest cent.)

Solutions

Expert Solution

Rate = 0.101 /2 = 0.0505

Present Value Annuity =

where r is the rate of Return for compounding period = 0.0505

n is the no of compounding period 7 years * 2 = 14

= $818.97

jeff jeffy answered 1 year ago

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