If you pay rent of $1,200 due on the beginning of each year

Finance Aug 13, 2020

If you pay rent of $1,200 due on the beginning of each year. If the annual interest rate is 8%, the present value of 5 year's rent is: Select one: O a. $8200 O b. $5174.55 O c. $7120 O d. $6170

Expert Solution

AS the rent is paid at the beginning of each year it is an 'annuity
due', whose present value = 12001.08(1.08^5-1)/(0.08*1.08^5) =	$ 5,174.55
Answer: [b] $5,174.55

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