a friend wants to borrow money from you. He states that he will pay you $3000 every 6 months for 12 years with the first payment exactly 3 years and six months from today. The interest rate is an APR of 5.3 percent with semiannual compounding. What is the value of the payments today?

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Respuesta :

andromache andromache · Answer 1 · 2020-07-25T02:31:06+02:00

Answer:

$45,111.41

Explanation:

For calculation of value of the payments today first we need to find out the value at 3 years which is shown below:-

Value at 3 years = PMT × (1 - (1 ÷ (1 + r^n))) ÷ r

= $3,000 × (1 - (1 ÷ (1.0265 ^24))) ÷ 0.0265

= $52,776.45

Now, The value of the payment today = Value at 3 year ÷ (1 + r^n)

= $52,776.45 ÷ (1.0265^6)

= $45,111.41

Therefore we have applied the above formula.