Question

You took out a loan to buy a new car. The monthly interest rate on the loan is 0.5%. You have to pay $240 every month for 60 months.

1. What is the present value of the cash flows if it's an annuity due?

2. What is the future value of the cash flows if it's an annuity due?

Answer 1

i = 0.5% , pmt = $ 240

1) Present value = 240 + 240/(1 + 0.5%) + ...... + 240/(1 + 0.5%)⁵⁹

PV = $ 12476.21

2)

Future value = PV x (1 + 0.5%)⁶⁰ = $ 16828.5