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21 April, 14:41

Your grandmother is gifting you $125 a month for four years while you attend college to earn your bachelor's degree. At a 6.5 percent discount rate, what are these payments worth to you on the day you enter college? A. $5,201.16 B. $5,270.94 C. $5,509.19 D. $5,608.87 E. $5,800.00

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  1. 21 April, 17:44
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    The answer is B. $5,270.94

    Explanation:

    C is the cash flow per period

    i is the rate of interest

    n is the frequency of payment

    PV of an Annuity = C x [ (1 - (1+i) ^-n) / i ]

    PV of an Annuity = 125 x [ (1 - (1+0.065/12) ^-12*4) / 0.065/12] = $5,270.94
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Home » Business » Your grandmother is gifting you $125 a month for four years while you attend college to earn your bachelor's degree. At a 6.5 percent discount rate, what are these payments worth to you on the day you enter college? A. $5,201.16 B. $5,270.94 C.
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