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Use the PV command to find the present value of each of the following future cas

ID: 2715977 • Letter: U

Question

Use the PV command to find the present value of each of the following future cash flows at a discount rate of 10% per year, compounded monthly: (Warning: Be sure to use the rate that’s appropriate for the calculations in each part of this problem. Labels for data and calculated values must all be complete.) a. Monthly payments of $1,500 at the beginning of each month for the next six years b. Monthly payments of $1,500 at the end of each month for the next six years. c. Year-end receipts of $5,000 for each of the next five years.

Explanation / Answer

A

B

C

1

solution

2

monthly payment

1500

3

interest rate p.a

10%

4

number of years

6

5

value when payments are over

0

6

payment at begining

0

7

payment at begining

1

8

9

a

.=PV(C2/12,C3*12,C1,C4,C5)

-              80,968.00

10

b

.=PV(C2/12,C3*12,C1,C4,C6)

-              81,642.73

11

12

yearly receipt

5000

13

interest rate (monthly compounded)

10%

14

interest rate (annul compounded)

10.47%

15

(1+(0.1/12))^12-1

16

17

c

.=PV(C13,5,-5000,0,0)

                18,727.91

A

B

C

1

solution

2

monthly payment

1500

3

interest rate p.a

10%

4

number of years

6

5

value when payments are over

0

6

payment at begining

0

7

payment at begining

1

8

9

a

.=PV(C2/12,C3*12,C1,C4,C5)

-              80,968.00

10

b

.=PV(C2/12,C3*12,C1,C4,C6)

-              81,642.73

11

12

yearly receipt

5000

13

interest rate (monthly compounded)

10%

14

interest rate (annul compounded)

10.47%

15

(1+(0.1/12))^12-1

16

17

c

.=PV(C13,5,-5000,0,0)

                18,727.91