Ann Hopkins borrowed $60,000 for her child’s education. She must repay the loan at the end of 8 years in one payment with 512% i

Question

2 years ago

11

nterest. What is the maturity value Ann must repay?

1 answer:

mart [117] · Answer 1 · 2023-05-21T01:17:11+03:00

The Maturity Value that Ann must pay is $89,461.

Assuming the rate of interest is compounded annually.

Given,

Principal value = $60,000 = P

Rate of interest = 5.12% = i

Number of years = 8 = T

Since maturity value = Amount

Now, using the formula for calculating the amount,

Amount = P × {(1+i)^T}

Now, substituting the given values in the above formula for amount we get,

Amount = $60,000 × {(1+0.0512)^8}

= $60,000 × {(1.0512)^8}

= $60,000 × 1.49101776418

= $89,461.0658

= $89,461 (Approximately)

Hence, The Maturity Value that Ann must pay is $89,461.

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