Trish receives $480 on the first of each month. Josh receives $480 on the last day of each month. Both Trish and Josh will receive payments for next three years. At a 9.5 percent discount rate, what is the difference in the present value of these two sets of payments?

Question

Quizplus · Accepted Answer

The difference in present value arises because Trish receives payments at the beginning of each month, which means each payment is discounted for one less month compared to Josh's payments. This results in a higher present value for Trish's payments. Calculating the present value of both annuities and finding the difference gives approximately $118.63.

Trish Receives $480 on the First of Each Month