Question

In: Finance

19. If r = 15% and n = 5, the payment on a $5000 discount loan > $10,000.

True or False

19. If r = 15% and n = 5, the payment on a $5000 discount loan > $10,000.

20. If r = 6% and n = 6%, the FVIFA > 7.

Solutions

Expert Solution

19. Payment after 5 years = 5000 * 1.155

                                      = 5000 * 2.0114

                                      = $ 10,056.79 Answer

Thus it true since value is more than 5000.

20. FVIFA = ( 1 + r )1 + ( 1 + r )2 + ( 1 + r )3 + ........ + ( 1 + r )6

                = ( 1 + 0.06 )1 + ( 1 + 0.06 )2 + ( 1 + 0.06 )3 + ...... +( 1 + 0.06 )6

               = 6.9753

Thus, statement is false because value is less than 7.

jeff jeffy answered 2 years ago
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