Hi to you,

I don't know how to solve this problem:

Smith Wishes to buy a TV set and is offered a time payment plan whereby he makes 24 monthly payments of 30 each starting now. Smith wants the payments to start in 2 months rather than now. If interest is at a one-month interest rate of 1%, what is the present value now of the savigs to Smith if the seller agrees to Smith's terms?

answer :12.68$

What I made :

First find what he would have paid :

$\displaystyle 30* \frac{(1+0.01)^{24}-1}{0.01} = 771,49$

Secondly find what he would pay if the seller agrees :

$\displaystyle 30*\frac{(1+0.01)^{22}-1}{0.01} = 683,44$

Then one minus the other and bring back to time 0 but this is:

771,49 - 683,44 = 88,05,

$\displaystyle 88,05*(1+0.01)^{-24} = 69.35$

Which is not the good answer.

Any help would be greatly appreciated!

Stev381