Question

Jessica will be receiving $3,600 five years from now. Her desire is to get a loan...

Jessica will be receiving $3,600 five years from now. Her desire is to get a loan today and then repay it in one lump sum when she receives her funds. What is the maximum loan Jessica can get today if the bank charges 8.5% interest?

a. $2,433.86

b. $2,416.36

c. $2,501.08

d. $2,394.16

e. $2,357.10

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Homework Answers

Answer #1

- Jessica will receive amount 5 years from now(Future Value) = $3600

Jessica will take a loan to pay it as a lump using tthe amount received in 5 years.

Calculating the maximum loan amount that Jessica can get:-

where, r = Interest rate = 8.5%

n = no of years = 5

3600 = Loan Amount*1.50365669018

Loan Amount = $2394.16

hence, Option D

If you need any clarification, you can ask in comments.     

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