In: Finance
After living in a university residence for one year, Kate
decides to rent an apartment for the remaining three years of her
degree. She has found a nice location that will cost $860 per
month. Rent for the first and last month must be paid up
front.
How much money would Kate need to have in her bank account right
now to be sure she will always have enough for rent? The bank
account pays 3.0 percent interest, compounded monthly.
(Round answer to 2 decimal places, Do not round your
intermediate calculations.)
Amount Alysha would need to have right now | $Type your answer here |
PMT = $860
Nper = 34
Rate = 3% / 12 = 0.25%
FV = 0
Present value can be calculated by using the following excel
formula:
=PV(rate,nper,pmt,fv)
=PV(0.25%,34,-860,0)
= $27,998.26
Amount Alysha would need to have right now = Present value +
Upfront payments
= $27,998.26 + ($860 + $860)
= $29,718.26
Amount Alysha would need to have right now =
$29,718.26