Question

A $1,700,000 building generates monthly rent from tenants of $22,000 for 10 years, which are paid at the beginning of each month. The landlord-owners are paying 6 percent interest on the mortgage. What is the present value of the rental payments they are receiving?

Group of answer choices

$1,981,616

$1,991,524

$233,200

$1,334,443

Answer 1

Option B $1,991,524 is the correct answer

Explanation: -

The equation for present value with payments made at the beginning of the month is:

Where,

PV = Present value

C = monthly payment

r = interest rate = 6 / 12 = .5%

n = number of periods = 10 * 12 = 120 periods

By substituting the values we get,