Your parents are giving you $170 a month for 5 years while you are in college. At a 7 percent discount rate, what are these payments worth to you when you first start college

PV = $8,586.15

Explanation:

Giving the following information:

Cash flow = $170

Number of months = 5*12 = 60

Discount rate = 0.07/12 = 0.00583

First, we need to calculate the future value, using the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

FV = {170*[ (1.00583 ^60) - 1]} / 0.00583

FV = $12,169.53

Now, the present value:

PV = FV / (1+i) ^n

PV = 12,169.53 / (1.00583^60)

PV = $8,586.15