Amanda borrowed $1,500, $3,500 and $5,000 at the beginning of each year. The rate of interest was at 4.8% compounded monthly. Using the financial functions on the calculator, determine the value that must be repaid at the end of year 3.
A) $10,829.10.
B) $11,034.67
C) $11,464.22
D) $11,829.67
E) $12,318.54

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the three loans at the end of year 3 is $10,829.10. This can be calculated using the FV function on a financial calculator. The formula is:FV(rate, nper, pmt, pv, type)where:rate is the annual interest rate (4.8%)nper is the number of periods (3 years * 12 months = 36 months)pmt is the monthly payment ($1,500 + $3,500 + $5,000 = $10,000)pv is the present value of the loans ($1,500 + $3,500 + $5,000 = $10,000)type is the payment type (0 for end of period, 1 for beginning of period)Plugging these values into the calculator, we get:FV(0.048/12, 36, 10000, 0, 1) = $10,829.10

Amanda Borrowed $1,500, $3,500 and $5,000 at the Beginning of Each