you have decided to sublet your apartment. your tenant has agreed to pay $150 per month starting today (with payments made at the beginning of each month) there are eight months left on your lease in the appropriate interest interest rate is 6%, compounded monthly. what is the present value of this agreement?

PV = $1,173.44

Explanation:

Giving the following information:

your tenant has agreed to pay $150 per month. There are eight months left on the lease, the appropriate interest rate is 6%, compounded monthly.

To calculate the net present value, first, we need to calculate the final value and then use the present value formula.

FV = {A*[ (1+i) ^n-1]}/i

A = annual pay = 150

i=0.06/12 = 0.005

n=8

FV = {140[ (1.005^8) - 1]}/0.005 = 1,221.21

Now, we calculate the present value:

PV = FV / (1+i) ^n

PV = 1,221.21/1.005^8 = $1,173.44