Given the time-value of money of 11% compounded annually, calculate the size of the month-end payments for the next five years that would be equivalent to a single payment of $13,285 payable five years from now.

Question

Quizplus · Accepted Answer

To find the monthly payment, we first need to find the present value of the $13,285 due in five years using the formula for present value: PV = FV / (1 + r)^n, where FV is the future value, r is the annual interest rate, and n is the number of years. Then, we use the annuity formula to find the monthly payment: PMT = PV * [r / (1 - (1 + r)^-n)], where r is the monthly interest rate and n is the total number of payments. After calculations, the correct monthly payment is approximately $169.39.

Given the Time-Value of Money of 11% Compounded Annually, Calculate