A loan of $A is taken out today.You are given that this loan is to be paid off with a payment of $20,000 in 3 years and 8 months.Determine A,if j₂ = 10% and the practical method of crediting/charging interest is used.

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the loan is $13,988.01. This is calculated using the formula PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. In this case, FV is $20,000, r is 10%, and n is 3.67 years (3 years and 8 months).

A Loan of $A Is Taken Out Today