A man agreed to pay php 1,000 at the end month for 20 years, in purchasing a house

Accounting Dec 11, 2020

A man agreed to pay php 1,000 at the end month for 20 years, in purchasing a house. Find the present value of this argument if money is worth 12% compounded monthly. Show your solution

Expert Solution

Computation of Present Value using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Present Value = ?

Rate = 12%/12 = 1% compounded monthly

Nper = 20 years * 12 months = 240 months

PMT = $1,000 per month

FV = 0

Substituting the values in formula:

=-pv(1%,240,1000,0)

PV or Present Value = $90,819.42

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