You have decided to sublet your apartment. Your tenant has agreed to pay $150 per month...
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You have decided to sublet your apartment. Your tenant has agreed to pay $150 per month starting today (with payments made at the beginning of each month). There are 8 months left on your lease and the appropriate interest rate is 6%, compounded monthly. What is the present value of this agreement?
Homework Answers
This question requires application of PV of an annuity due (since payment is made at beginning of the month).
Now, in this equation,
R = $150, n = 8 (months), i = 6%/12 = 0.5% (monthly)
PV = 150 * 7.8230 * 1.005
PV = $1,179.31
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