A contract requires end-of-month payments of $175 for another 8 1/4 years. What would an investor pay to purchase this contract if she requires a rate of return of 3% compounded monthly? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

A contract requires end-of-month payments of $175 for another 8 1/4 years. What would an investor pay to purchase this contract if she requires a rate of return of 3% compounded monthly? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 41P

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Question

A contract requires end-of-month payments of $175 for another 8 1/4 years. What would an investor pay to purchase this contract if she requires a rate of return of 3% compounded monthly? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Investor would pay $

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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