The wording is confusing . . .
I don't understand the use of dates.Find the present value to the nearest dollar on January 1 ?
of an annuity which pays $2,500 every month for 10 years.
The first payment is due on the next April 1 ?
and the rate of interest is 11% convertible monthly.
The answer i got was 24104.02971.
Can anyone pls help confirm this with steps? Thanks
. . And what do they mean by "first payment is due"?
I interpret the problem like this:
We want to collect $2500 per month, starting next month.
We will deposit a sum of money (present value) now
. . and get 11% interest, compounded monthly.
Formula: . . where: .
We have: .
Therefore, we must deposit $181,488 now.