Problema Solution

Find the present value of $1,500,000 if interest is paid at a rate of 8.5%compounded monthly for 9 years.

Answer provided by our tutors

Hi,

A = P*(1+(r/n))^(n*t)

here we have A = 1,500,000; r = 0.085; n = 12 and t = 9

then 1,500,000 = P*(1 + (0.085/12))^(12*9) ) <==> 1,500,000 = P*(1,007083333)^108

then P = 1,500,000/(1,007083333)^108 = 699885.6995

The present value is 699885,70