Question

You have just leased a car that has monthly payments of $375 for the next 3 years with the first payment due today. If the APR is 7.08 percent compounded monthly, what is the value of the payments today

Answer 1

Answer:

$10,887

Explanation:

To find the value of the payments today, you have to calculate the present value using the following formula:

P= F/((1+i)^n)

P= present value

F= future value: $375*36= $13,500

i= interest rate: 7.08%/12= 0.59%

n= number of times: 12*3= 36 months

P= $13,500/((1+0.0059)^36)

P= $13,500/(1.0059^36)

P= $13,500/1.24

P= $10,887

The value of the payments today is $10,887.