Find the present value of an annuity if $1,900.00 is paid to you at the end of each month for 7 years, if interest is earned at a rate of 6%, compounded monthly.
The present value is $
To find the present value of the annuity, we can use the formula:
PV = PMT * (1 - (1 + r)^-n) / r
Where:
- PV is the present value of the annuity
- PMT is the payment received at the end of each month ($1,900.00)
- r is the interest rate per compounding period (6% per year, compounded monthly, so r = 6%/12 = 0.06/12 = 0.005)
- n is the number of compounding periods (7 years * 12 months/year = 84 compounding periods)
Using this formula, we can substitute the values:
PV = $1,900 * (1 - (1 + 0.005)^-84) / 0.005
PV ≈ $145,153.76
Therefore, the present value of the annuity is approximately $145,153.76.