Question

) Repayments on a rental property by the university of Nairobi is done by Kshs. 200,000 at 

time 5, Kshs. 190,000 at time 6, Kshs. 180,000 at time 7 and so on until a payment of 

Kshs. 100,000 at time 15. Assuming an annual effective rate of interest of 3.5%. 

Calculate 

i) The present value of the repayments at time 4 

ii) The present value of the repayments at time 0 

iii) The accumulated value of the repayments at time 15 

Answer 1

i) The present value of the repayments at time 4 is zero, because no payments were made before time 5.

ii) The present value of the repayments at time 0 is zero, because no payments were made before time 5.

iii) The accumulated value of the repayments at time 15 is:

$PV = 200,000/1.035^5 + 190,000/1.035^6 + 180,000/1.035^7 + 170,000/1.035^8 + 160,000/1.035^9 + 150,000/1.035^{10} + 140,000/1.035^{11} + 130,000/1.035^{12} + 120,000/1.035^{13} + 110,000/1.035^{14} + 100,000/1.035^{15}.$