Question

Sindi borrowed an amount of money from his father to open the Salon. The loan will be paid back by means of payments of R25 000 each, every second month for six years. An interest rate of 7,5% per year, compounded every two months, will be applicable. The present value of the loan is

Answer 1

The present value of the loan will be = R36,250

Calculation of the present value

The principal capital (P) = R25 000

Interest rate for the payment (R)= 7.5%

Time for the payment (T)= 6 years

Therefore simple interest = P×T×R/100

= 25,000×6×7.5/100

= 250×6×7.5

= R11,250

The present value of the loan will be;

= 25,000 + 11,250

= R36,250

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