Your car loan requires payments of $200 per month for the first year and payments of $400 per month during the second year.The annual interest rate is 12 percent and payments begin in one month.What is the present value of this two-year loan?

Question

Quizplus · Accepted Answer

The present value of the loan is the sum of the present values of the two annual payments. The present value of the first annual payment is $200/(1+0.12/12) = $196.43. The present value of the second annual payment is $400/(1+0.12/12)^2 = $363.64. The present value of the loan is $196.43 + $363.64 = $6,246.34.

Your Car Loan Requires Payments of $200 Per Month for the First