After 8 years a loan grows to $75 210. If the interest was compounded annually at a rate of 8.5%, find the size of the initial l

Question

Gennadij [26K]

2 years ago

7

After 8 years a loan grows to $75 210. If the interest was compounded annually at a rate of 8.5%, find the size of the initial l

oan to the nearest dollar.

Mathematics

1 answer:

stealth61 [152] · Answer 1 · 2022-03-08T05:08:36+03:00

Given:
Future Value = $75,210
term = 8 years
rate = 8.5%
Initial loan = ?

In this case, we need to find the present value of the loan. Compounded means that even the interest has an interest.

PV = FV / (1 + i)^n

PV = 75,210 / (1 + 0.085)⁸

PV = 75,210 / (1.085)⁸

PV = 75,210 / 1.9206

PV = 39,159.64

Initial loan is $39,159.64
total interest is $75,210 - 39,159.64 = $36,050.36