A person buys a piece of property for 100,000 pesos down payment and ten deferred semi-annual...
A person buys a piece of property for 100,000 pesos down payment and ten deferred semi-annual payments of 8,000 pesos each starting three years from now. What is the present value of the investment if the rate of interest is 12% compounded semi-annually?
Homework Answers
Present Value of Investment is 158,880.70 pesos
| Present value of investment | = | Down Payment | + | Present Value of deferred payment |
| = | 1,00,000.00 | + | 58,880.70 | |
| = | 1,58,880.70 pesos | |||
| Working: | ||||
| Present Value of deferred payment | =-pv(rate,nper,pmt,fv) | |||
| = 58,880.70 pesos | ||||
| Where, | ||||
| rate | = | 12%/2 | = | 0.06 |
| nper | = | 10 | ||
| pmt | = | 8,000 pesos | ||
| fv | = | 0 |
.
Note:
As per discounted cash flow, present value of investment is the sum of present value of cash flows.
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