Marie is considering investing a part of her future income in an investment account that offers 0.5 percent a month.She will start work in 6 months and her contract extends for 2 years.If the investment amount is $300 a month,what is the present value of this investment?

Question

Quizplus · Accepted Answer

The first step to calculate the present value of an investment is to determine the total number of periods and the rate per period. In this case, there are 24 periods (2 years x 12 months) and a monthly rate of 0.5%.
Using the formula for present value of an annuity, the calculation is:
PV = Pmt x ((1 - (1 / (1+r)^n)) / r)
Where:
PV = present value
Pmt = payment per period
r = interest rate per period
n = total number of periods
Plugging in the values:
PV = $300 x ((1 - (1 / (1+0.005)^24)) / 0.005)
PV = $6,569.30
Therefore, the present value of this investment is $6,569.30, which corresponds to option C.

Marie Is Considering Investing a Part of Her Future Income