Question
In: Finance
Lida has been awarded a scholarship that will pay $2,500 one year from now. However, Lida...
Lida has been awarded a scholarship that will pay $2,500 one year from now. However, Lida really needs the money today, and has decided to take out a loan. If the interest rate is 8 percent, how much can Lida borrow so that the scholarship will just pay off the loan?
Solutions
Expert Solution
| Here, $2500 is the FV after 1 year. The amount Lida | |
| can borrow is the PV of the $2500 discounted at 8%. | |
| Amount that can be borrowed = 2500*1.08 = | $ 2,700 |
| Answer: $2,700 |
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