Question

Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today

Answer 1

Answer: $13,986 to the nearest dollar

Explanation:

The answer would be the present value of $17,000 today discounted at a rate of 5%.

= 17,000/ (1 + 5%)⁴

= 17,000/ 1.21550625‬

= $13,985.94

= $13,986 to the nearest dollar