1. Emma availed a cash loan that gave her an option to pay P10,000 monthly for 1 year. The first payment is due after 6 months. How much is the present value ofthe loan if the interest is 12% compounded monthly?
I need a solution.I hope you can help me.Thank you!
Answers
Given : Emma availed a cash loan that gave her an option to pay P10,000 monthly for 1 year
first payment is due after 6 months.
interest is 12% compounded monthly
To Find : present value of the loan
Solution:
EMI Formula = [P x (R/100) x (1+(R/100)ⁿ]/[(1+(R/100)ⁿ-1]
EMI = 10000
P = Value after 5 months as 1st Payments id due after 6 months
R = 12 % per annum = 1 % per month
n = 12 months
10000 = [P x (1/100) x (1+(1/100)¹²]/[(1+(1/100)¹²-1]
=> 10000 = [P x (1/100) x (1.01)¹²]/[(1.01)¹²-1]
=> P = 1,12,550.775
Present Value = X
Value after 5 Months
1,12,550.775 = X( 1 + 1/100)⁵
=> X = 1,07,088.2
present value of the loan = 1,07,088.2
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