Homework Answers
Information provided:
Time= 3 years*4= 12 quarters
Interest rate= 10%/4= 2.50% per quarter
Quarterly payment= $100
The question is solved by computing the present value of annuity due.
Annuity due refers to annuity that occurs at the beginning of a period.
This can be solved using a financial calculator by inputting the below into the calculator:
The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2nd BGN 2nd SET on the Texas BA II Plus calculator.
Enter the below in a financial calculator in BGN mode:
N= 12
I/Y= 2.5
PMT= 100
Press the CPT key and PV to compute the present value.
The value obtained is 1,051.4209.
Therefore, the single amount I should pay is $1,051.4209.
Hence, the answer is option b.
In case of any query, kindly comment on the solution
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