Answer to Question #265607 in Financial Math for shehan mendis

Question

Find the present value of $700 due in five years’ time at 6% p.a. compounded monthly

Answer 1

Future value is $700

Interest rate is 6%

As the interest rate is compounded monthly, the monthly rate will be 6% divided by 12 that is equal to 0.005

Time period is 5 years.

As the interest rate is compounded monthly, the number of periods is 5 multiplied by 12 that is equal to 60

With the given values, we can determine the present value using excel as:

Answer: Hence, the present value is $518.96