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Your home mortgage has an interest rate of 4% APR and requires monthly payments of $1,000 (ordinary annuity). Your bank offers you an opportunity to
Your home mortgage has an interest rate of 4% APR and requires monthly payments of $1,000 (ordinary annuity). Your bank offers you an opportunity to pay at the beginning of each month as an annuity due. Since the bank will receive the payments sooner, the payments will be smaller. The annuity due payment will be PMTDUE = PMTORD / (1 + r). How much will your payment be if you pay as at the beginning of each month?
a. $961.54
b. $996.68
c. $1,003.33
d. $1,040
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