Present value of a loan

User Generated

evyrlox

Business Finance

Description

What is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten years? Please provide the formula that you used.

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Explanation & Answer

Thank you for the opportunity to help you with your question!

FORMULA FOR COMPOUND INTEREST

A=P(1+r/n)^n.t

=500(1+0.1/1)^6

=500(1.1)^6

=$2.7680e16

It it happens for 10years

=2.53295e27

Please let me know if you need any clarification. I'm always happy to answer your questions.


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