Given Information:
Monthly payment = MP = $1500/4 = $375
Monthly interest rate = r = 25/12 = 2.083%
Required Information:
Present Value = ?
Answer:
[tex]PV = \$10,110[/tex]
Explanation:
n = 10*4
n = 40 monthly payments
The present value is found by
[tex]$ PV = MP \times \frac{ (1 - \frac{1}{(1+r)^n} )}{r} $[/tex]
Where r is monthly interest rate.
MP is the monthly payment.
[tex]$ PV = 375 \times \frac{ (1 - \frac{1}{(1+0.02083)^{40}} )}{0.02083} $[/tex]
[tex]PV = 375 \times (26.96)[/tex]
[tex]PV = \$10,110[/tex]
Therefore, $10,110 is the present value of 10 quarterly payments of $1500 each at 25% interest rate compounded each month.
