In: Finance
Your parents plan to give you $200 a month for four years while you are in college. At a discount rate of 6 percent, compounded monthly, what are these payments worth to you when you first start college?
$8,797.40
$8,409.56
$8,198.79
$8,516.06
$8,279.32
Payments worth | P×[1-(1÷(1+r)^n)]÷r | |
Here, | ||
1 | Interest rate per annum | 6.00% |
2 | Number of years | 4 |
3 | Number of compoundings per per annum | 12 |
4 = 1÷3 | Interest rate per period ( r) | 0.50% |
5 = 2×3 | Number of periods (n) | 48 |
Payment per period (P) | $ 200 | |
Payments worth | $ 8,516.06 | |
200*[1-(1/(1+0.50%)^48]/0.50% |