You have a 20-year annuity with a present value of $575,000. If the APR is 6%, what is the monthly yield?

Question

Quizplus · Accepted Answer

We can first use the present value formula for an annuity to find the monthly payment:

PV = PMT x [(1 - (1+i)^(-n))/i]

where PV is the present value, PMT is the monthly payment, i is the monthly interest rate, and n is the number of months.

Plugging in the given values, we get:

575,000 = PMT x [(1 - (1+0.005)^(-240))/0.005]

Solving for PMT, we get:

PMT = $4,119.48

Therefore, the monthly yield is the same as the monthly interest rate, which is 0.005 or 0.5%.

You Have a 20-Year Annuity with a Present Value of $575,000