Business math <>

Question

A loan of $50,000 at 7% is due in 16 months. Find the present value of the loan if the time value of money is 10%.

Answer 1

50,000 in 16 months at 10% has present value = P

=50,000/e^.1(4/3) = about $43,758.67 rounded to nearest cent, with continuous compounding

worth a little more for finite compounding

for annual compounding

50000=P(1.10)^(4/3)

P=50000/1.1^(4/3) = about $44,033.15