Suppose you borrow money from your parents for college tuition on January 1, 2013. Your parents require four annual payments of $1,000 each, with the first payment due on January 1, 2017. They are charging you 6% annual interest. What is the cost of the college tuition?
A) $2,909.37
B) $1,593.85
C) $4,000.00
D) $2,744.69

Question

Quizplus · Accepted Answer

The cost of the college tuition is the present value of the four $1,000 payments, discounted at 6% per year over the period from 2017 to 2013. Calculating the present value gives $2,909.37.

Suppose You Borrow Money from Your Parents for College Tuition