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An investment offers to pay you $5,000 bimonthly for the next 15 years (the payments start...

An investment offers to pay you $5,000 bimonthly for the next 15 years (the payments start a month after you purchase the investment). If the interest rate is 6%, how much should you pay for this investment?

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Answer #1

5000$ for twice a month costs $10000 ( SInce it is bi monthly )

Rate of Interest = 6% / annum

Monthly interest would become 6/12= 0.5% / month

Time Period =15*12 =180

Present Value of the future Cashflows would be =

A=$10000

since Rate of interest has to be divided by 12 , the time period i.e.n has to be multiplied by 12

Therefore : 10000   *    (1-(1+.06/12)^-180 )    /   0.06/12

Answer : 1185035 $

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