Question

In: Finance

Find the present value of $1000 paid at the end of each month for 5 years...

Find the present value of $1000 paid at the end of each month for 5 years at 12% compounded
semi-annually

If possible, please use in terms of a financial calculator

Expert Solution

There are 12 months in a year.

There are 2 semi-annual periods in a year.

(1 + semi annual rate)^n - 1 = (1 + monthly rate)^n - 1

(1 + 0.12/2) - 1 = (1 + monthly rate)^12 - 1

(1 + 0.06)^2 - 1 = (1 + monthly rate)^12 - 1

1.1236 - 1 = (1 + monthly rate)^12 - 1

1.1236 = (1 + monthly rate)^12

1.00976 = 1 + monthly rate

Monthly rate = 0.00976 or 0.976%

Total number of periods = 5 * 12 = 60

Present value = $45,250.54

Keys to use in a financial calculator:

PMT -1000

I/Y 0.976

N 60

CPT PV

jeff jeffy answered 2 years ago

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