Question

A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier. If the total amount of money the company paid was $1.7 million and the interest rate on the loan was 11% per year, how much money did the company borrow 1 year ago

Answer 1

Answer:

PV= $1,521,531.53

Explanation:

Giving the following information:

Future value= $1,700,000

Number of periods= 1 year

Interest rate= 11%

To calculate the initial value of the loan, we need to use the following formula:

PV= FV/(1+i)^n

FV= future value

n= number of periods

i= interest rate

PV= present value

PV= 1,700,000/1.11

PV= $1,521,531.53