Nancy billows promised to pay her son$600 quarterly for four years. If nancy can invest her money at 6% in an ordinary annuity, she must invest how much today?

To compute the present value, we will follow this formula

P = A[ (1+r) ^n-1]/[r (1+r) ^n

where

P = principal amount

A = annuity or amortization; $600

r = interest rate; 6%

n = number of payments = 4x4=16

Substituting the given data, we will get

P = $6063.54

Nancy billows must invest $6063.54 today for her son.