Tuesday, July 12, 2011
3 year annuity due with quarterly payments of $5,000 and an 8% discount rate compounded monthly. Find the PV.?
A three year annuity due with quarterly payments of $5,000 and an 8% discount rate compounded monthly. Find the PV. Payments start 2.75 years from now. The problem is asking for the PV at time zero but I am having a difficult time reconciling the fact that the interest rate is compounded monthly and the payment period is quarterly. I tried dividing the payment by 4 to match them up but with no luck. The correct answer for time zero is $43,285. Can anyone offer any suggestions on how to get there (preferably with a finance calculator)?
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