Jackson has a loan that requires a $17,000 lump sum payment at the end of four years.The interest rate on the loan is 5%,compounded annually.How much did Jackson borrow today? (PV of $1,FV of $1,PVA of $1,and FVA of $1)$\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$
A)$16,150
B)$13,600
C)$11,504
D)$13,986
E)$15,343

Question

Quizplus · Accepted Answer

We need to find the present value of the loan, which is the amount Jackson borrowed today. We can use the formula:

PV = FV/(1 + i)^n

where FV is the future value of the loan, i is the interest rate, and n is the number of periods.

In this case, FV = $17,000, i = 5%, and n = 4.

Using the FV of $1 table, we can find the factor for (1 + i)^n = (1 + 0.05)^4 = 1.2155.

Therefore, PV = $17,000/1.2155 = $13,986.

So Jackson borrowed $13,986 today. The answer is D.

Jackson Has a Loan That Requires a $17,000 Lump Sum (Use appropriate factor(s)from the tables provided.)\bold{\text{(Use appropriate factor(s)from the tables provided.)}}(Use appropriate factor(s)from the tables provided.)

Jackson Has a Loan That Requires a $17,000 Lump Sum $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$