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# Can you please explain me this question? Thanks! What is the discounted value of the stream...

Can you please explain me this question? Thanks!

What is the discounted value of the stream of payments: \$1250 received at the end of every month for 3 years and 2 months? Interest is 2.75% compounded monthly.

#### Homework Answers

Answer #1

The amount is computed as shown below:

Present value = Monthly payment x [ (1 – 1 / (1 + r)n) / r ]

r is computed as follows:

= 2.75% / 12 (Since the interest is compounded monthly, hence divided by 12)

= 0.002291667

n is computed as follows:

= 3 x 12 + 2 (Since the interest is compounded monthly, hence multiplied by 12)

= 38

So, the amount is computed as follows:

= \$ 1,250 x [ (1 - 1 / (1 + 0.002291667)38 ) / 0.002291667 ]

= \$ 45,440.71 Approximately

Feel free to ask in case of any query relating to this question

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