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You need to borrow money today from your father. You can make payments like this: 1st...

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Finance

You need to borrow money today from your father. You can makepayments like this: 1st year: $1000, 2nd year: $2,000, 3rd year:$3,000, 4th year: $4,000, 5th year: $5,000. Your dad says that hesgetting 4% on his CDs, compounded annually, and you'll need to payhim the same rate. How much can you borrow?

Answer & Explanation Solved by verified expert
3.7 Ratings (453 Votes)

Ans $ 13006.49

Year Project Cash Flows (i) DF@ 4% DF@ 4% (ii) PV of Project ( (i) * (ii) )
1 1000 1/((1+4%)^1) 0.962                           961.54
2 2000 1/((1+4%)^2) 0.925                       1,849.11
3 3000 1/((1+4%)^3) 0.889                       2,666.99
4 4000 1/((1+4%)^4) 0.855                       3,419.22
5 5000 1/((1+4%)^5) 0.822                       4,109.64
PV                     13,006.49

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Transcribed Image Text

You need to borrow money today from your father. You can makepayments like this: 1st year: $1000, 2nd year: $2,000, 3rd year:$3,000, 4th year: $4,000, 5th year: $5,000. Your dad says that hesgetting 4% on his CDs, compounded annually, and you'll need to payhim the same rate. How much can you borrow?

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