Suppose you are a property owner and you are collecting rent for an apartment. The tenant has signed a one-year lease with $600 a month rent, payable in advance. Find the present value of the lease contract if the discount rate is 12% per year.

 Suppose you are a property owner and you are collecting rent for an apartment. The tenant has signed a one-year lease with $600 a month rent, payable in advance. Find the present value of the lease contract if the discount rate is 12% per year.

Answer

Here monthly rent =$600, Number of months = 12 ,

We use this formula here

Present value of the lease contract = 600 + 600 x [1-(1.01)^-11]/0.01

Present value of the lease contract = 6820.58

Here another way to do it this one: