You need some money today and the only friend you have that has any is your 'miserly' friend. He agrees to loan you the money you need, if you make payments of $20 a month for the next six
Month. In keeping with his reputation, he requires that the ﬁrst payment be paid today. He also
Charges you 1.5% interest per month. How much money are you borrowing?

Question

Quizplus · Accepted Answer

To find the amount borrowed, we need to use the formula for present value of an annuity:
PV = A(1 - (1 + r)^-n)/r
where PV is the present value, A is the annuity payment, r is the monthly interest rate, and n is the number of payments.

In this case, A = $20, r = 0.015, n = 6, and we need to solve for PV.

PV = $20(1 - (1 + 0.015)^-6)/0.015
PV = $115.65

Therefore, the amount borrowed is $115.65.

You Need Some Money Today and the Only Friend You