Suppose you take out a car loan that requires you to pay $9,000 now, $3,000 at...

Suppose you take out a car loan that requires you to pay $9,000 now, $3,000 at the end of year 1, and $7,000 at the end of year 2. The interest rate is 3% now and increases to 6% in the next year. What is the present value of the payments?

Expert Solution

PV = FV / (1 + r)^t

Present value of the payments = $9,000 + $3,000/1.03 + $7,000/1.06^2

Present value of the payments = $18,142.60

jeff jeffy answered 2 years ago

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