Suppose you take out a car loan that requires you to pay $7,000 now, $5,000 at...

Suppose you take out a car loan that requires you to pay $7,000 now, $5,000 at the end of year 1, and $6,000 at the end of year 2. The interest rate is 4% now and increases to 9% in the next year. What is the present value of the payments?

Expert Solution

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

=>

loan amount

= 7000 + 5000/1.09 + 6000/1.09^2

= 16637.24

jeff jeffy answered 2 years ago

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