Your grandmother will be gifting you $150 at the end of each month for four years...
Your grandmother will be gifting you $150 at the end of each month for four years while you attend college. At a discount rate of 3.7 percent, what are these payments worth to you on the day you enter college?
Homework Answers
These payments are worth to you on the day you enter college $ 6,682.99
| Present value | = | Monthly payment | * | Present value of annuity of 1 | ||||
| = | $ 150 | * | 44.55324 | |||||
| = | $ 6,682.99 | |||||||
| Working: | ||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | |||||
| = | 44.553239 | i | = | 3.7%/12 | = | 0.003083 | ||
| n | = | 4*12 | = | 48 | ||||
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