Your cable bill is $122 per month (starting next month) If your investments earn 4.00% APR...

Question

Question

Answer 1

Answer #1

Let the amount invested be X

Monthly Cable bill P = $122

Interest rate on investment = 0.04/12 monthly

So, we need to calculate the PV of all the 12 payments that will be made in next 12 months

Hence, X = P/(1+r) + P/(1+r)² +.... P/(1+r)¹² = P [1 - (1+r)^-n]/r = 122 (1 - (1+0.04/12)^-12)/(0.04/12) = $1432.77

Hence, $1432.77 must be invested today at 4% to pay monthly cable bills of $122 for next 12 months

Answer 2

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