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Your parents are going to give you $200 at the end of each month for 4...

Your parents are going to give you $200 at the end of each month for 4 years while you are in college. At a 0.5% monthly discount rate, what are these payments worth to you when you first start college?

Solutions

Expert Solution

Number of periods = 4 * 12 = 48

Present value = Monthly payments * [1 - 1 / (1 + rate)^time] / rate

Present value = 200 * [1 - 1 / (1 + 0.005)^48] / 0.005

Present value = 200 * [1 - 0.7871] / 0.005

Present value = 200 * 42.58032

Present value = $8,516.06

jeff jeffy answered 2 years ago
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