Question

Jeremy Fenloch borrowed some money from his friend and promised to repay him the amounts of $1,225, $1,350, $1,500, $1,600, and $1,600 over the next five years. If the friend normally discounts investments at 8 percent annually, how much did Jeremy borrow ?

Answer 1

Answer:

Explanation:

PV formula=Payment* PVF at 8%

So,

Year 1: PV=1225; PVF=0.925926; PV = 1225*0.925926=1134.26

Year 2: PV=1350; PVF=0.857339; PV = 1350*0.857339=1157.41

Year 3: PV=1500; PVF=0.793832; PV = 1500*0.857339=1190.75

Year 4: PV=1600; PVF=0.73503; PV = 1600*0.73503=1176.05

Year 5: PV=1600; PVF=0.680583; PV = 1600*0.0.680583=1088.93

If we add everything, it will amount into 5747.40 = amount of borrowing