The above question can be solved using excel functions.
a) payment every month =$500
number of years =6
lease rate = 5.4%, compounded annually.
using excel function => =PV(5.4%,6,-$500,1)
= $2,504.97
where, pv function gives present
value of future investments
rate= 5.4%
nper=6
pmt=$500
type = 1(payment beginning of month)
b)
payment every month =$500
number of years =6
lease rate = 5.4%, compounded daily.
using excel function => =PV(5.4%/365,6*365,-$500,1)
= $9,35,252.38
rate= 5.4%/365
where, pv function gives present value of future investments
nper=6*365
pmt=$500
type = 1(payment beginning of month)
Since the compounding is done daily lease rate and no of periods are adjusted accordingly.
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