Question

Suppose payments will be made for 9 1 4 years at the end of each month from an ordinary annuity earning interest at the rate of 3.75%/year compounded monthly. If the present value of the annuity is $46,000, what should be the size of each payment from the annuity

Answer 1

Answer:

monthly payment will be $208.61  

Explanation:

given data

time = 14 year

interest at the rate = 3.75% = 0.0375

present value of the annuity =  $46,000

solution  

we apply here future value formula that is

future value  = PMT × $\frac{(1+\frac{r}{m})^{n\times m} -1}{(\frac{r}{m}}$     .................1

put here value

46000  = PMT × $\frac{(1+\frac{0.0375}{12})^{14\times 12} -1}{\frac{0.0375}{12}}$  

solve it we get

PMT = 208.61

monthly payment will be $208.61