Question

In: Finance

Mary needs to borrow $55,500 for four years. The loan will be repaid in one lump...

Mary needs to borrow $55,500 for four years. The loan will be repaid in one lump sum at the end of the loan term. Which one of the following interest rates is best for Jenny?

6.5 percent interest, compounded annually

6.5 compounded quarterly

6.5 percent compounded continously

6.5 percent compounded semi-annualy

6.75 percent interest, compounded annually

Solutions

Expert Solution

Based on the given data, pls find below answers: Have calculated the Future Value (FV) based on the given data, and based on the below given options;

6.5 percent interest, compounded annually; Answer: FV is $ 71398.88

6.5 compounded quarterly; Answer: FV is $ 71829.35

6.5 percent compounded continuously; Answer: FV is $ 71977.95

6.5 percent compounded semi-annually; Answer: FV is $ 71682.55

6.75 percent interest, compounded annually; Answer: FV is $ 72071.66

Based on the above, the lowest FV is from the option with 6.5% interest, compounded annually;


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