Today,you are borrowing money from your local bank.The loan is to be repaid in one lump sum payment of $15,000 one year from now.How much money are you borrowing today if the APR is 10.6 percent?

Question

Quizplus · Accepted Answer

We can use the formula for future value of a single sum: 
FV = PV(1 + r)^n 
where FV is the future value, PV is the present value (what we're trying to find), r is the annual interest rate (in decimal form), and n is the number of years.

Substituting the given values: 
$15,000 = PV(1 + 0.106)^1

$15,000 = PV(1.106)

PV = $15,000 / 1.106

PV = $13,562.39

So the amount of money borrowed today is $13,562.39. Therefore, the best choice is C.

Today,you Are Borrowing Money from Your Local Bank