A company has borrowed money at discount; that is, they will not pay any interest on it during the 5 years when the loan is outstanding.If interest rates are 8% and the total repayment will be $50,000, the amount they will receive now from the bank is closest to:

Question

Quizplus · Accepted Answer

The company has borrowed money at a discount, so the amount they will receive now from the bank will be less than the total repayment amount. 
To find out how much they will receive now, we need to calculate the present value of the loan using the formula:

Present Value = Total Repayment / (1 + interest rate)^time

Where time is the number of years until the loan is due. In this case, time = 5.

Plugging in the given values, we get:

Present Value = $50,000 / (1 + 0.08)^5 = $34,029.

Therefore, the closest answer choice is B.

A Company Has Borrowed Money at Discount; That Is, They