A consumer loan you took out several years ago requires fixed monthly payments of $700.00. You...

A consumer loan you took out several years ago requires fixed monthly payments of $700.00. You just made a payment, and 29 payments remain to be made; the next payment is due in one month. The rate of return used to compute these payments (when the loan was granted) was 21% (APR, compounded monthly). [Use annuity formulas to answer the questions below.]

a. What is the present value of the remaining payments, using the APR given above as a discount rate?

b. Your friend, a bank loan officer, looked at your risk profile. She says that her bank would offer you a loan on similar terms but at a lower return: an annual return of 19% (EAR). Use that return to determine the present value of your future payments on the loan described above.

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jeff jeffy answered 2 years ago

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