Find present value as at january 2009 of a series of payments of 100 payable on first day of each month during years 2010,2011,2012. Assume effective rate of interestof 8% p.a
NO. "12% annual compounded monthly" means 1% per month, so 1.01^12 - 1 = .126825 (12.6825% effective).
You assumed "12% effective annual compounded monthly", or:
(1 + i)^12 = 1.12 ; i = .009488... ; i * 12 = .11386...
Even at that, you need to use .009488 in your calculation, not .11386:
[1 - (1 / 1.009488)^12] / .009488 = 11.2915...
So, using $100 per month, present value is $1129.15
Your original problem states: "Assume effective rate of interestof 8% p.a".
The word "effective" means (1 + i)^12 = 1.08.
If instead it was: "Assume rate of interestof 8% p.a compounded monthly", then:
effective annual rate = (1 + .08/12)^12 - 1 = .0829995... (~8.3%)