Which set of payments is the most valuable given 12% APR interest?
A)$100.00 received monthly for the next 12 months
B)$300.00 received quarterly for the next four quarters
C)$600.00 received semi-annually for the next two semi-annual periods
D)$1,200.00 received one year from today

Question

Quizplus · Accepted Answer

The present value of option A, which is receiving $100.00 monthly for the next 12 months, can be calculated using the formula PV = (PMT/i) * (1 - 1/(1+i)^n) where PMT is the monthly payment, i is the interest rate per month (APR/12), and n is the number of periods (12). Plugging in the values, we get PV = (100/0.01) * (1 - 1/(1.01)^12) = $1,126.51. This is the highest present value compared to the other options, making it the most valuable set of payments.

Which Set of Payments Is the Most Valuable Given 12