Respuesta :
a) The present value of the loan is $12190.66
b) The present value of the loan decreases as the time increases
Step-by-step explanation:
Step 1 :
Given
Amount after 12 years = $25000
number of years = 12
interest rate = 6% compounded monthly
Step 2 :
The amount is computed using the formula
A = P ( [tex](1 + \frac{r}{100} )^{n}[/tex]
Where P = Principal amount
r = interest rate
n = number of terms
Here,
A = 25000
r = 6% × 12 (as it is compounded monthly)
n = 6 × 12 (as it is compounded monthly)
So we have ,
25000 = P [tex](1+\frac{6}{12*100} )^{12*12}[/tex]
=> P(2.05) = 25000
=> P = $12190.66
Step 3 :
The present value of the loan decreases as the time increases
Step 4 :
Answer :
The loan's present value is $12190.66
