Question

For an interest rate of 3% compounded monthly, find the present value of an annuity of $129 at the end of each month for 5 months and $259 thereafter at the end of each month for further 1 years. Round your answer to TWO decimals. The present value of the annuity=

Answer 1

For an interest rate of 3% compounded monthly; monthly interest rate = 3%/12 = 0.25% per month

Month (n)	Monthly Annuity Payments (CF)	Present Value of Monthly payments = CF/(1+3%/12)^n
1	$129	$128.68
2	$129	$128.36
3	$129	$128.04
4	$129	$127.72
5	$129	$127.40
6	$259	$255.15
7	$259	$254.51
8	$259	$253.88
9	$259	$253.24
10	$259	$252.61
11	$259	$251.98
12	$259	$251.35
13	$259	$250.73
14	$259	$250.10
15	$259	$249.48
16	$259	$248.86
17	$259	$248.24
The present value of the annuity (sum of Present Value of Monthly payments)	$3,660.33

The present value of the annuity= $3,660.33

Formula used in excel calculation: