FINANCE am Question 25 of 36 value 400 points Youve been awa

FINANCE am Question 25 (of 36) value 400 points You\'ve been awarded a scholarship that pays $210 a month for 6 years while you are in college. At a 6 percent annual discount rate with monthly compounding, what are these payments worth to you when you first start college? Assume the first payment will be received at the end of the month $12,426.00 $12,671.30 $12.449.30 $12.954.30 $15,120.00

Solution

Monthly Payment = $210
Period = 6 years or 72 months
Annual Interest Rate = 6%
Monthly Interest Rate = 0.50%

Present Value = $210/1.005 + $210/1.005^2 + $210/1.005^3 + ... + $210/1.005^72
Present Value = $210 * (1 - (1/1.005)^72) / 0.005
Present Value = $210 * 60.3395
Present Value = $12,671.30

So, value of these payments at the beginning of college is $12,671.30