Trish receives $450 on the first of each month.Josh receives $450 on the last day of each month.Both Trish and Josh will receive payments for next four 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 her payments at the beginning of each month, while Josh receives his at the end. This means Trish's payments are effectively received one month earlier than Josh's, leading to a higher present value for her payments. The difference in present value is calculated using the formula for the present value of an annuity due versus an ordinary annuity, resulting in $141.80.

Trish Receives $450 on the First of Each Month