Question

On January 1, a company agrees to pay $20,000 in three years. If the annual interest rate is 10%, determine how much cash the company can borrow with this agreement?

Answer 1

Amount borrow P = $15,026.296

Step-by-step explanation:

Given:

Amount pay A = $20,000

Number of year n = 3

Rate r = 10% = 0.10

Find:

Amount borrow P

Computation:

A = P[1+r]ⁿ

20,000 = P[1+r]³

20,000 = P[1+0.10]³

20,000 = P[1.10]³

20,000 = P[1.331]

Amount borrow P = $15,026.296