RatedrillAnnuity due: value of a lease
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A tenant owes $800 rent at the start of each month on a 12-month lease. At a discount rate of 10% APR, compounded monthly, what is the present value of all the rent?
What this problem teaches
The formula: PV(due) = PMT × (1 - (1 + i)^-n) / i × (1 + i). Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive.
A hint if you get stuck
Rent at the start of each month is an annuity due: the first payment is today and is not discounted.
This problem is part of Pro
Pro unlocks all 53 problems, with worked solutions and progress saved to your account. The free problems work without an account.
You create a free account first, so Pro is attached to it.
Monthly is charged today and then every month until you cancel, in one click from your account page. Lifetime is one payment with no renewals. Full refund within 14 days of paying.