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Jennifer will need to pay $200 at the end of every month for the next 12...

Jennifer will need to pay $200 at the end of every month for the next 12 months, except for the payment of the 5th month. What is the present value, assuming a rate of 4%, compounded quarterly?

$2,348.97

$2,254.09

$2,160.06

$2,152.26

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Homework Answers

Answer #1

Effective monthly rate, r = (1 + 0.04/4)^(1/4) - 1

r = 0.002490679314

First, let's find the present value including the 5th month payment.

Now, let's find the PV of the 5th month payment

PV = 200/(1 + 0.002490679314)^5 = $197.5278235165

We will subtract this from 2,361.5928316976 to get our answer.

Answer: 2,361.5928316976 - 197.5278235165 = $2,164.0650081811

Closest answer is option C: $2,160.06

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