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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...
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 Spring '14

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