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We Pay Insurance Co. will pay you $1,100 each quarter for 24 years. You want to earn a minimum interest rate of .85 percent per quarter. What is the most you are willing to pay today for these payments?

Respuesta :

truonghanhduyen

Answer:

You are willing to pay $71,988.60 today for these payments

Explanation:

Payment received per quarter (PMT): $1,100

Tenor: 24 years -> NPer = 24 years * 4 quarter = 96

Rate = 0.85% per quarter

We use excel to calculate present value of these payment =  PV(rate,NPer,PMT) = PV(0.85%,96,1100) = -$71,988.60

fichoh

Answer:$72,600.50

Explanation:

GIVEN :

Payment per period(PMT) = $1,100

Period = 24 years (quarterly) = 24 × 4 = 96

Interest rate(r) = 0.85% quarterly = 0.0085

PV = PMT×[1-((1+r)^-n)] ÷r ×(1+r)

PV = 1100×[1-((1+0.0085)^-96)]÷0.0085 ×(1 + 0.0085)

PV = 1100×[1-(1.0085^-96)] ÷ 0.0085 × (1.0085)

PV = 1100×(0.5562756)÷(0.0085) × (1.0085)

PV = 1100 × 65.4441882352× 1.0085

PV = $72,600.50

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