87 today to be able to pay your sister 1000 at the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: – How much money do your grandparents have to set aside today to make sure they can pay her as promised, assuming the annual interest rate is 10%? Answer: 3169.87 Interpretation: - This means your grandparents have to put aside $3,169.87 today to be able to pay your sister $1,000 at the end of each of the next four years (assuming an effective annual interest rate of 10%). Pure Discount Loans – Simplest form of a loan. - Government bills Interest ­Only Loans Loan amount = PV = Future Value (1+r)n – Borrower borrows PV. Pays interest on the amo...
View Full Document

Ask a homework question - tutors are online