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Rafael just joined a new gym and signed up for a one-year membership. Membership fees can be paid in 12 monthly payments of $55, due at the beginning of each month or in one payment today. If the appropriate interest rate is 11%, how much should he pay today for the annual membership?

Respuesta :

Answer:

$628.01

Explanation:

For this question, we use the Present value function that is reflected on the attached spreadsheet

Provided that

Future value = $0

Rate of interest = 11%  ÷ 12 months = 0.916666%

NPER = 12 months

PMT = $1,55

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value is $628.01

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