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30 December, 11:53

How much would you pay today for an asset that pays $1,000 per month, for 12 months, starting today if the interest rate is 4% APR (compounded monthly)

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  1. 30 December, 12:08
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    Present value of Annuity will be used for this as the future payments are given after equal intervals.

    PV of an Annuity = C x [ (1 - (1+i) ^-n) / i ]

    Where,

    C is the cash flow per period

    i is the rate of interest

    n is the frequency of payments

    add given Values in the formula:

    $1,000 x [ (1 - (1+4%) ^-12) / 0.04 ] = $9387.5 is the Answer
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