What is the current value of an overdue

Rieng Mzing

Rieng Mzing

Answered question

2022-06-16

What is the current value of an overdue annuity for which quarterly payments of $2,850.00 MXN are made for 4 years, which are charged an annual interest rate of 12% compounded quarterly?

Answer & Explanation

star233

star233

Skilled2023-05-21Added 403 answers

To find the current value of an overdue annuity, we can use the formula for the present value of an annuity.
The formula for the present value of an annuity is:
PV=P×(11(1+r)n)/r
where PV is the present value, P is the periodic payment, r is the interest rate per period, and n is the number of periods.
In this case, the quarterly payment is 2,850.00 MXN, the annual interest rate is 12%, and the payments are made for 4 years. Since the interest is compounded quarterly, we need to adjust the interest rate and the number of periods accordingly.
The interest rate per quarter is 12% divided by 4, which is 0.03, and the number of quarters is 4 years multiplied by 4, which is 16.
Substituting the values into the formula, we have:
PV=2850×(11(1+0.03)16)/0.03
Calculating the expression inside the parentheses:
PV=2850×(111.0316)/0.03
Simplifying further:
PV=2850×(111.6226)/0.03
PV=2850×(10.6167)/0.03
PV=2850×0.3833/0.03
PV=36608.33
Therefore, the current value of the overdue annuity is 36,608.33 MXN.

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