> #interest-rate , #finance , #compound-interest , #investment > Determine the Presence value of a USD 10000 payment to be received on January 1 , 2027 if it is now may 1, 2018 and the money was invested at 3% annual interest rate compounded monthly?
Dec 17, 2023

# Determine the Presence value of a USD 10000 payment to be received on January 1 , 2027 if it is now may 1, 2018 and the money was invested at 3% annual interest rate compounded monthly?

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Dec 17, 2023
To determine the present value of a future payment, we need to discount it back to the present using the given interest rate and time period.

First, let's calculate the number of months between May 1, 2018, and January 1, 2027:

Number of years = 2027 - 2018 = 9 years
Number of months = 9 years * 12 months/year = 108 months

Next, let's calculate the monthly interest rate:

Monthly interest rate = 3% / 100% / 12 = 0.0025

Now, we can use the present value formula for monthly compounding:

Present Value = Future Value / (1 + r)^n

Where:
- Future Value = USD 10000
- r = monthly interest rate = 0.0025
- n = number of months = 108

Present Value = 10000 / (1 + 0.0025)^108
Present Value ≈ 10000 / (1.0025)^108
Present Value ≈ 10000 / 1.3182
Present Value ≈ 7589.94

Therefore, the present value of a USD 10000 payment to be received on January 1, 2027, if it is now May 1, 2018, and the money was invested at a 3% annual interest rate compounded monthly, is approximately USD 7589.94.
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Surenda Kumar
Dec 18, 2023
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