Question

Find the present value of a series of investment of  $1  at the beginning of each year for 15 years with effective interest rate of 13.5% p.a.

Answer 1

Solution:

Given, $p=\$1,r=13.5\%\ p.a.=0.135, n=15\ years$

So, present value,$PV=p[\dfrac{1-(1+r)^{-n}}{r}]$

$=1[\dfrac{1-(1+0.135)^{-15}}{0.135}]=\$6.298926\approx\$6.3$