Boris and Bela pay Art the Artist $100 at the beginning of each month for 3 years to buy an oil painting of Bozo the Clown.

Boris and Bela pay Art the Artist $100 at the beginning of each month for 3 years to buy an oil painting of Bozo the Clown. What is the value of the painting, now, for insurance purposes? The value is _________________

rate is 12% per annum compounded monthly

Solutions

Expert Solution

Present Value Of An Annuity Due

=C + C*[1-(1+i)^-(n-1)]/i]

Where,

C= Cash Flow per period

i = interest rate per period =12%/12 =1%

n=number of period =12*3 =36

= $100+100[ 1-(1+0.01)^-(36-1) /0.01]

= $100+100[ 1-(1.01)^-35 /0.01]

= $100+100[ (0.2941) ] /0.01

= $3040.86

jeff jeffy answered 2 years ago

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