You just got a job. You ask for a loan from your parents to pay for...
You just got a job. You ask for a loan from your parents to pay for day to day expenses. Your parents agreed to lend you the money if you agree to pay them back within six months at an interest rate of 3%. You can pay them $100 at the end of the first two months, $125 for months 3 and 4 and $150 for months 5 and 6. Calculate the present value.
multiple choice, but please solve with step by step directions on how to solve problem!
a.) $695.03 b) $671.81 c) $765.35 d) $742.98
Homework Answers
This question requires application of basic time value of money, according to which
FV = PV * (1 + r)2 or
We need to apply this for each cash flow.
Rate of interest would be monthly = 3%/12 = 0.25% (monthly)
PV = 99.75 + 99.50 + 124.07 + 123.76 + 148.14 + 147.77
PV = $742.98 (Option d)
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