Question

What is the market value of Investment XYZ if it pays $3,232 per month, starting next month, for 6 months and the interest rate is 3.75% APR compounded monthly?

Answer 1

Market Value of Investment = PV of CFs from it.

PV of Annuity:

Annuity is series of cash flows that are deposited at regular intervals for specific period of time.

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
r - Int rate per period
n - No. of periods

Particulars	Amount
Cash Flow	$            3,232.00
Int Rate	0.3125%
Periods	6

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
= $ 3232 * [ 1 - [(1+0.0031)^-6]] /0.0031
= $ 3232 * [ 1 - [(1.0031)^-6]] /0.0031
= $ 3232 * [ 1 - [0.9815]] /0.0031
= $ 3232 * [0.0185]] /0.0031
= $ 19181.66

Market Value of Investment is $ 19181.66