question archive You need some money today and the only friend you have that has any is your ‘miserly' friend
You need some money today and the only friend you have that has any is your ‘miserly' friend
Subject:FinancePrice:2.87 Bought7
You need some money today and the only friend you have that has any is your ‘miserly' friend. He agrees to loan you the money you need, if you make payments of $20 a month for the next six months. In keeping with his reputation, he requires that the first payment be paid today. He also charges you 1.5% interest per month. How much money are you borrowing?
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A. $113.94 |
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B. $115.65 |
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C. $119.34 |
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D. $119.63 |
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E. $119.96 |
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Answer:
option is > B. $115.65
Present value or Loan = PV
Payment = PMT
N = Number of period
Rate = Rate per period
.
Formula for Present value of annual payments at beginning of period:
PV = PMT+ PMT * ((1-(1+R)^-(N-1))/R)
PV = 20+20*((1-(1+1.5%)^-(6-1))/1.5%)
PV = 115.6528995
Hence, answer is $115.65
