A loan of $A is taken out today.The loan is to be paid off with a payment of $20,000 in 44 months.If the interest rate on the loan is j₂ = 10% and the practical method of crediting/charging interest is used,what is the value of A?

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Quizplus · Accepted Answer

The value of A can be calculated using the formula for the present value of a single future payment, which is $A = \frac{P}{(1 + i)^n}$, where P is the future payment, i is the monthly interest rate, and n is the number of months. Given that the annual interest rate is 10%, the monthly interest rate is $i = \frac{10\%}{12} = \frac{0.10}{12}$. The future payment P is $20,000, and the number of months n is 44. Plugging these values into the formula gives $A = \frac{20,000}{(1 + \frac{0.10}{12})^{44}}$, which calculates to approximately $13,988.01.

A Loan of $A Is Taken Out Today