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Mr. Smith has a loan of P1500 from a bank due in 5 years. How much money must he pay now if the bank is willin |
Mr. Smith has a loan of P1500 from a bank due in 5 years. How much money must he pay now if the bank is willing to settle for the present value of the if the current rate of interest is 10 percent compounded quarterly? can you please give me the formula for this problem. please give me the solution...thanks.... X = Amount he would pay now. i = interest = 10% n = number of interest compounding periods t = time in years m = number of annual interest compoundings (i.e. quarterly = 4) In general: X (1 + (i/m))^n = 1500 n = t*m = 4 * 5 = 20 X(1 + (.10/4))^20 = 1500 X(1.025)^20 = 1500 X*1.6386 = 1500 X = 1500/1.6386 X = 915.4064 |
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