What is the fair market value at the end of the payment term of a P2,000 investment made every month for 3 years if the interest rate is 1.5% compounded monthly?
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What is the fair market value at the end of the payment term of a P2,000 investment made every month for 3 years if the interest rate is 1.5% compounded monthly?
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FAIR MARKET VALUE
What is the fair market value?
Answer:
The fair market value at the end of the payment term is approximately P77,383.
Step-by-step explanation:
To calculate the fair market value at the end of the payment term, we can use the formula for the future value of an ordinary annuity:
FV = P * [(1 + r)^n - 1] / r
Where:
FV = Future Value
P = Monthly payment amount
r = Interest rate per period
n = Number of periods
In this case, the monthly payment amount (P) is P2,000, the interest rate (r) is 1.5% or 0.015 (expressed as a decimal), and the number of periods (n) is 3 years multiplied by 12 months, which equals 36 months.
Plugging in the values into the formula:
FV = 2000 * [(1 + 0.015)^36 - 1] / 0.015
Calculating this equation will give us the fair market value at the end of the payment term, which is approximately P77,383.
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