A) What is the future value of the loan 8 years from now?
B) Did he make a wise investment?
Homework Answers
a.Future value of annuity=Annuity[(1+rate)^time period-1]/rate
=$7200[(1.05)^8-1]/0.05
=$7200*9.549108876
=$68,753.58(Approx).
b.Since sale proceeds is higher than future value of loan;a wise investment is made.
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