Intro You took out a loan to buy a new car. The monthly interest rate on the loan is 0.4% You have to pay $250 every month for 60 months, starting one month from now IB Attempt 1710 for 10 pts. Part 1 What is the present value of the cash flows? Correct With an ordinary annuity, cash flows occur at the end of edhe period. The first cash flow thus occurs one period from now, rather than now. A traditional mortgage is an example of an ordinary annuity. We can use the annuity formula to find its present value PVC1 7 (1+1) 250 0.004 20 (1- a +0.00) (1 + 0.004) = 13,312 Using a financial calculator PMT FV NVY PV Inputs60 0.4 Compute 13,312 PV 250 0.004 (1 + 0.004) = 13,312 Using a financial calculator: NIY PV PMT FV Inputs 60 0.4 -2500 Compute 1 3,312 Using Excel (do not enter the thousands separators): =PV(rate, nper, pmt) =PV(0.004, 60, -250) =13,312 Given that this is a loan, the present value of all monthly payments is the initial loan balance, i.e., the amount borrowed. IB Attempt 2/10 for 10 pts. Part 2 What is the future value of the cash flows? No decimals Submit