Question

Twelve payments of $5,000 each are to be repaid monthly at the end of each month. The monthly interest rate is 3%.

What is the present equivalent of these payments

Answer 1

Present value = P/ (i+i)¹ + P/ (i+i)² + P/ (i+i)³ . . . . . . . + P/ (i+i)ⁿ

= $ 5000 / (1+ 0.03)¹ + $ 5000 / (1+ 0.03)² + $ 5000 / (1+ 0.03)³ + . . . .  $ 5000 / (1+ 0.03)¹²

= 4854.37 + 4712.98 + 4575.71 + . . . . .3506.90

= 49770.02

or

Months	Payment	PVF (3%)	PV
1	5000	0.970874	4854.369
2	5000	0.942596	4712.98
3	5000	0.915142	4575.708
4	5000	0.888487	4442.435
5	5000	0.862609	4313.044
6	5000	0.837484	4187.421
7	5000	0.813092	4065.458
8	5000	0.789409	3947.046
9	5000	0.766417	3832.084
10	5000	0.744094	3720.47
11	5000	0.722421	3612.106
12	5000	0.70138	3506.899
Present value			49770.02