Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of 5 years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the 5 years?

Question

Quizplus · Accepted Answer

Future Value = Present Value * Interest Factor
Future Value = $105,000 * 1.6289 = $171,034.50
1.6289 is the interest factor on the Future Value table; n =5 * 2 = 10; i = 10/2 = 5%
Goal of $175,000 - Future Value of $172,034.50 = Shortage of $3,965.50

Troy Has $105,000 Now