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) (Use appropriate factor(s) from the tables provided.) A) $15,343 B) $11,504 C) $16,150 D) $13,986 E) $13,600

Question

Quizplus · Accepted Answer

Using the formula for present value of a lump sum:
PV = FV / (1 + i)^n
where PV = present value, FV = future value, i = interest rate, and n = number of periods.
Plugging in the values:
PV = $17,000 / (1 + 0.05)^4
PV = $13,986.21
Therefore, Jackson borrowed $13,986.21 today. Option D is the correct answer.

Jackson Has a Loan That Requires a $17,000 Lump Sum