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Your roommate asks for a loan, offering to make weekly payments of $25 for two years. If the appropriate interest rate is 8.25% APR, compounded weekly, how much would you be willing to lend her today
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Your roommate asks for a loan, offering to make weekly payments of $25 for two years. If the appropriate interest rate is 8.25% APR, compounded weekly, how much would you be willing to lend her today

User Martin Brown
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1 Answer

9 votes

Answer:

You should be willing to lend your roommate the sum of $2,395.08 today.

Step-by-step explanation:

a) Data and Calculations:

Weekly loan repayment = $25

Period of loan = 2 years

Interest rate = 8.25% APR, compounded weekly

b) Using online finance calculator:

FV (Future Value) $2,824.37

PV (Present Value) $2,395.08

N (Number of Periods) 104.000

I/Y (Interest Rate) 0.159%

PMT (Periodic Payment) $25.00

Starting Investment $0.00

Total Principal $2,600.00

Total Interest $224.37

User Fedeteka
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