What is the present value of a stream of monthly payments of $500 each over 10 years, if the interest rate is 10% per annum, compounded monthly?
Equation (2.7), with the appropriate substitutions, gives
A/P = \frac{i(1 + i)^n}{(1 + i)^n – 1} = \frac{i}{1 – (1 + i)^{-n}} (3.6) \\\\ P = \$500\frac{(1 + 0.10/12)^{(12)(10) – 1}}{(0.10/12)(1 + 0.10/12)^{(12)(10)}} = \$500\frac{1.70704}{(0.0083333)(2.70704)} = \$37 835.72