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You need some money today and the only friend you have that has any is your miserly friend. He agrees to loan you the money you need, if you make payments of $30 a month for the next six months. In keeping with his reputation, he requires that the first payment be paid today. He also charges you 2 percent interest per month. How much money are you borrowing?Group of answer choices

Respuesta :

Answer:

$171.40

Explanation:

Data provided:

Monthly payments, PMT = $30

Time period, n = 6 months

Monthly Interest rate = 2% = 0.02

Now,

The amount borrowed is calculated as:

= PMT × ([tex]1 + \frac{1-(1+r)^{-(n-1)}}{r}[/tex])

on substituting the respective values,

we have

= $30 × [tex]1 + \frac{1-(1+0.02)^{-(6-1)}}{0.02}[/tex]

= $30 × ( 1 + 4.7134 )

= $171.40

Hence, The amount borrowed is $171.40

Answer:

Borrowed money is $171.40

Explanation:

Given:

Monthly payments = $30

Time period = 6

Interest rate = 2%

Amount borrowed is the present value of annuity.

Present value of annuity = [tex]30\times(\frac{ 1-\frac{1}{(1+0.02)^{6} }}{0.02}  )[/tex]

                                         = 30×5.713

                                         = $171.40

Therefore, $171.40 is borrowed today from the friend.

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