Question

You borrowed some money at 8 percent per annum. You repay the loan by making three annual payments of $ 150 (first payment made at t = 1), followed by five annual payments of $ 561 , followed by four annual payments of $ 894 . How much did you borrow? (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).

Answer 1

Amount borrowed is the present value of cash flows.
Year	Cash flow	Discount factor	Present value
a	b	c=1.08^-a	d=b*c
1	$        150	0.9259	$     138.89
2	150	0.8573	128.60
3	150	0.7938	119.07
4	561	0.7350	412.35
5	561	0.6806	381.81
6	561	0.6302	353.53
7	561	0.5835	327.34
8	561	0.5403	303.09
9	894	0.5002	447.22
10	894	0.4632	414.09
11	894	0.4289	383.42
12	894	0.3971	355.02
Total			$ 3,764.44
So, amount borrowed is			$ 3,764.44