Student Question: Begin Mode

QUESTION:
Hi, my question is if this asked for the pmts at the end of the the year would you ADD N+1 TO GET THE ANSWER?

7. JLP Enterprises, Inc. owns a small shopping center and it has just signed a fiver-year, triple-net lease for an out parcel with an auto parts retailer that requires annual rent payments of $12,500 at the beginning of each year. If the landlord’s discount rate on this lease is 9 percent per year, what is the present value of the lease?

ANSWER:
Remember, you can always draw a time-line to help you visualize what is going on.

If the cash flows start at the beginning of the compounding period then you have two choices: 1) set you calculator to BEGIN or BEG mode (but remember to set it back to END mode because for most problems, the cash flows occur at the end of the period), or 2) calculate the answer in normal END mode and multiple your answer by 1 plus the interest rate per period (1 + i) (this will effectively start the compounding immediately). Your choice in approaches (but do NOT do both!).