Purchase Solution

# PV FV Monthly Compounding

Not what you're looking for?

1. Suppose the interest rate is 7% APR with monthly compounding. What is the present value of an annuity that pays \$80 every 3 months for 4 years?

The present value of the annuity is \$ (round to two decimal places)

2. If you deposit \$1 into a bank account that pays 0.5% per month for three years, the amount you will receive after the three years is: \$ (round to 5 decimals)

3. You are buying a house and the mortgage company offers to let you pay a "point" (1.0% of the total amount of the loan) to reduce your APR from 5.50% to 4.75% on your \$400,000, 30-year mortgage with monthly payments.

If you plan to be in the house for at least 5 years, should you do it?

The monthly mortgage payment at 5.50% APR is \$ (round to the nearest cent)

4. If the rate of inflation is 4%, what nominal interest rate is necessary for you to earn a 2% real interest rate on your investment?

The nominal interest rate is ______% (enter your response as a percent reoundedto one decimal place

##### Solution Summary

PV and FV monthly compounding is examined.

##### Solution Preview

MATH PROBLEMS

1. Suppose the interest rate is 7% APR with monthly compounding. What is the present value of an annuity that pays \$80 every 3 months for 4 years? The present value of the annuity is
Year 1 2
Period 0 (C) 3 6 9 12 15 18 21
Amount paid \$80 (A) \$80 \$80 \$80 \$80 \$80 \$80 \$80
Interest rate 0.58% (B) 0.58% =7%/12 0.58% 0.58% 0.58% 0.58% 0.58% 0.58%
Discount factor 1.00 ...

Solution provided by:
###### Education
• B. Sc., University of Nigeria
• M. Sc., London South Bank University
###### Recent Feedback
• "Thank you."
• "thank you Chidi Ngene.. if you have any APA references would be great"
• "Thank you so much for your help, your explanations were easy to understand and apply!"
• "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
• "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"

##### Free BrainMass Quizzes

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.