Calculating the present value of an annuity.

Suppose you are offered an investment that will pay you

$$1,550$ a month for $10$ years. If your required return is $9\%$

per year, compounded monthly, what would you be willing

to pay for this investment?

$PV=$$$1,550\mathrm{.}00**\frac{1-[\frac{1}{(1+0\mathrm{.}0075{)}^{120}}]}{0\mathrm{.}0075}=$

$$122,359\mathrm{.}62$

Suppose you want a new car and can afford to make

payments of $$500$ a month for $5$ years. If the interest rate is

$6\%$ per year, compounded monthly, how much can you

borrow?

Suppose you are offered an investment that will pay you

$$8,000$ a month for $20$ years. If your required return is $9\%$

per year, compounded monthly, what would you be willing

to pay for this investment?

Suppose you want to buy a house and can afford to make

payments of $$2000$ a month for $30$ years. If the interest rate

is $5\%$ per year, compounded monthly, how much can you

borrow?