An S&L provides a loan with 15 yearly repayments of $8,000 with the first payment beginning immediately. Which of the following amounts comes closest to the present value of the loan if the interest rate is 7%?
A) $72,863.
B) $77,964.
C) $115,648.
D) $120,000.

Question

Quizplus · Accepted Answer

The present value of an annuity due can be calculated using the formula for the present value of an annuity and adjusting for the immediate payment. The present value of the loan is closest to $77,964 when calculated with a 7% interest rate.

An S&L Provides a Loan with 15 Yearly Repayments of $8,000