Calculate the present value of the compound interest loan. (Round your answers to the nearest cent.)...

Question

Question

Calculate the present value of the compound interest loan. (Round your answers to the nearest cent.)

$26,000 after 6 years at 5% if the interest is compounded in the following ways.

(a) annually
$

(b) quarterly

$

Answer 1

Answer #1

	PV = FV/(1+r/m)^(m*n)
	where r = the annual interest
	m = the frequency of compounding in a year
	n = number of years.
a)	PV = 26000/1.05^6 =	$ 19,401.60
b)	PV = 26000/(1+0.05/4)^(6*4) =	$ 19,297.12

Answer 2

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