Marry pays 5000 at the end of every month to a bank as loan repayment the interest rate of 10% compounded monthly and t=4 months. Find the present value?

Answer 1

To find the present value, we need to calculate the amount that Marry needs to borrow from the bank.

The formula to calculate the present value of an annuity is:

PV = PMT * (1 - (1 + r)^(-n)) / r

Where:
PV = Present Value
PMT = Payment amount per period
r = Interest rate
n = Number of periods

In this case, Marry pays $5000 at the end of every month, the interest rate is 10% compounded monthly, and the loan duration is 4 months.

PMT = $5000
r = 10% (convert to decimal form: 0.10)
n = 4

Using the formula:

PV = $5000 * (1 - (1 + 0.10)^(-4)) / 0.10
PV = $5000 * (1 - (1.10)^(-4)) / 0.10
PV = $5000 * (1 - 0.68301) / 0.10
PV = $5000 * 0.31699 / 0.10
PV = $1584.95

Therefore, the present value of Marry's loan is approximately $1,584.95.