Solution to QUESTION-25
The Present Value of an Ordinary annuity
Monthly Payment (P) = $125
Monthly interest rate (r) = 0.54166667% per month [6.50% / 12 Months]
Number of years (n) = 48 Years [4 Years x 12 Months]
Therefore, the Present Value of an Ordinary annuity = P x [{1 - (1 / (1 + r) n} / r]
= $125 x [{1 - (1 / (1 + 0.0054166667)48} / 0.0054166667]
= $125 x [{1 - (1 / 1.296020435} / 0.0054166667]
= $125 x [{1 - 0.771592772} / 0.0054166667]
= $125 x [0.228407228 / 0.0054166667]
= $125 x 42.16748829
= $5,270.94
PLEASE BE NOTED (More than 1 Question)
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