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In: Finance

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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