Question 2.p.2: (a) Twelve rental payments of $1,000 will be paid monthly at...
(a) Twelve rental payments of $1,000 will be paid monthly at the end of each month. The monthly interest rate is 0.01. What is the present value of the payments?
(b) If the payments are at the beginning of each month, what is the present value?
(a) $ 1,000B(12, 0.01) = $ 1,000(11.2551) = $ 11,255.
(b) $ 1,000[B(11, 0.01) + 1] = $ 1,000(10.3676 + 1) = $ 11,368
or $ 11,255(1.01) = $ 11,368.
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