Jessica will be receiving $3,600 five years from now. Her desire is to get a loan today and then repay it in one lump sum when she receives her funds. What is the maximum loan Jessica can get today if the bank charges 8.5% interest?

Question

Quizplus · Accepted Answer

The maximum loan Jessica can get today is the present value of $3,600 due in five years at an interest rate of 8.5%. The present value is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years. Plugging in the values: PV = $3,600 / (1 + 0.085)^5 = $2,394.16.

Jessica Will Be Receiving $3,600 Five Years from Now