Compute the present and future worth of payments of a. 5,000 at the beginning of each month for 12 months. b. Future worth of 12 payments of 5,000 each at the beginning of each month ( at the end of the 12 months ) Interest = 1% per month.

Q: 3. $1,000 at the beginning of each month, forever.

A: Payment Amount = $1,000 Interest Rate = 5%

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.