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A contract requires lease payments of $900 at the beginning of every month for 7 years....

A contract requires lease payments of $900 at the beginning of every month for 7 years.

1-What is the present value of the contract if the lease rate is 3.25% compounded annually?

2- What is the present value of the contract if the lease rate is 3.25% compounded monthly?

Solutions

Expert Solution

1. Effective monthly rate, r = (1 + 0.0325)^(1/12) - 1

r = 0.002668808768

n = 7 * 12 = 84 months

PMT = 900

2. r = 3.25%/12 = 0.002708333333

PMT = 900

n = 84

jeff jeffy answered 2 years ago
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