Homework Answers
a.
Annual borrowing = 2,000 for three years.
Repayment of the loan will be 2 years later
(means after 3 years of borrowing, the loan will be kept for 2 years & repaid at the end of 5th year)
b. Calculate how much will be repaid at a 5% interest rate.
Calculate future value.
FV = 2,000 (F/A, 5%, 3) (F/P, 5%, 2)
FV = 2,000 (3.15250) (1.10250)
FV = 6,951
$6,951 will be repaid.
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