You owe $3572.75 in 147 days and have decided to pay off your loan early. Your interest rate is 6.52%. What is the size of the check that you write today to pay off all of your debt?

Question

Quizplus · Accepted Answer

To calculate the size of the check, we need to find the present value (PV) of the loan, which takes into account the interest rate and the time value of money. Using the formula for calculating PV of a loan, we get:

PV = FV / (1 + r)^n

where FV is the future value (i.e. the amount owed), r is the interest rate (as a decimal), and n is the number of periods (in this case, days) until the loan is due.

Plugging in the numbers, we get:

PV = 3572.75 / (1 + 0.0652)^(147/365) = 3481.33

Therefore, the size of the check that needs to be written today is $3481.33. Option B is the correct answer.

You Owe $3572