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You borrowed some money at 8 percent per annum. You repay the loan by making three...

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Finance

You borrowed some money at 8 percent per annum. You repay theloan by making three annual payments of $ 150 (first payment madeat t = 1), followed by five annual payments of $ 561 , followed byfour annual payments of $ 894 . How much did you borrow?(Round your answer to 2 decimal places; record your answerwithout commas and without a dollar sign).

Answer & Explanation Solved by verified expert
4.3 Ratings (631 Votes)

Amount borrowed is the present value of cash flows.
Year Cash flow Discount factor Present value
a b c=1.08^-a d=b*c
1 $        150      0.9259 $     138.89
2 150      0.8573         128.60
3 150      0.7938         119.07
4 561      0.7350         412.35
5 561      0.6806         381.81
6 561      0.6302         353.53
7 561      0.5835         327.34
8 561      0.5403         303.09
9 894      0.5002         447.22
10 894      0.4632         414.09
11 894      0.4289         383.42
12 894      0.3971         355.02
Total $ 3,764.44
So, amount borrowed is $ 3,764.44

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Transcribed Image Text

You borrowed some money at 8 percent per annum. You repay theloan by making three annual payments of $ 150 (first payment madeat t = 1), followed by five annual payments of $ 561 , followed byfour annual payments of $ 894 . How much did you borrow?(Round your answer to 2 decimal places; record your answerwithout commas and without a dollar sign).

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