Question

You borrowed some money at 8 percent per annum. You repay the loan by making three annual payments of $ 210 (first payment made at t = 1), followed by five annual payments of $ 411 , followed by four annual payments of $ 811 . How much did you borrow? (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).

Answer 1

We can solve this using present value method.

Present value = sum of (future value in year n / (1+discount rate)^n)

Here r = 8%;

All units in $

Present value = (210/(1+8%))+(210/(1+8%)^2)+(210/(1+8%)^3)+(411/(1+8%)^4)+(411/(1+8%)^5)+(411/(1+8%)^6)+(411/(1+8%)^7)+(411/(1+8%)^8)+(811/(1+8%)^9)+(811/(1+8%)^10)+(811/(1+8%)^11)+(811/(1+8%)^12)= 3295.10