On 2/1/21, Tim enters into a contract to purchase a tractor. The contract requires no money down upon execution of the contract, however requires Tim to make three, $6,500 monthly payments on 9/30, 10/30 and 11/30 of 2021. The contract does not specifically state an interest rate, however, the appropriate annual discount rate based on Tim’s finances is 24% (2% monthly). How much did Tim pay for the tractor?

There are four methods to determine the present value of this deferred annuity. In the four spaces below, use the tables in your Intermediate Accounting textbook to show each of these four methods. Your answer should be the same regardless of which method you use (rounding error is approx. $.10) You must draw a timeline in each case that correlates to how you are calculating each method.

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