We Pay Insurance Co. will pay you $1,250 each quarter for 30 years. You want to earn a minimum interest rate of .91 percent per quarter. What is the most you are willing to pay today for these payments?

Maximum amount to be paid today =$91,590.66

Explanation:

Number of quarter in 30 years = 30 × 4 = 120

Number of payment = 120

The maximum amount to be paid is the present value of the series of payment discounted at rate of 0.91% per quarter

PV = A ×( 1- (1+r)^(-n))/n  )

PV = 1250 ×  ( 1 - (1+0.0091)^(-120)/0.0091)

     = 1250 × 73.2725

     = $91,590.66

Maximum amount to be paid today =$91,590.66

$91,043.14

Explanation:

Since this is a stream of income flow, the formula for calculating the present value of an ordinary annuity is the relevant formula to use and it is given as follows:

PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)

Where;

PV = Present value or the amount to pay today = ?

P = Quarterly payment = $1,250

r = interest rate = 0.91%, or 0.0091

n = number of quarters = 30 × 4 = 120

Substituting the values into equation (1), we have:

PV = 1,250 × [{1 - [1 ÷ (1+0.0091)]^120} ÷ 0.0091]

     = 1,250 × 72.8345084286829

PV = $91,043.1355358536 = $91,043.14 approximately.

Therefore, most you are willing to pay today for these payments is $91,043.14 .

i might look it up later.

answer makes less frequent trips to the bank and firms make less frequent price changes;