If you make an investment and agree to pay regular monthly payments of $450 at the end of the next twelve months,starting one month from today,what is the present value of this investment if the interest rate is 8.4% per annum compounded monthly?
A) $3322.06
B) $4916.30
C) $5162.12
D) $5198.25

Question

Quizplus · Accepted Answer

To find the present value of the investment, we can use the formula for the present value of an annuity, which is:
Present value = (payment amount x (1 - (1 + interest rate)^-n)) / interest rate
Where:
Payment amount = $450
Interest rate = 8.4% / 12 = 0.7% per month (converted to monthly rate)
N = 12 (number of payments)

Plugging these values into the formula, we get:
Present value = ($450 x (1 - (1 + 0.007)^-12)) / 0.007
= ($450 x (1 - 0.0787)) / 0.007
= $5162.12

Therefore, the best choice is C.

If You Make an Investment and Agree to Pay Regular