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After 8 years a loan grows to $75 210. If the interest was compounded annually at a rate of 8.5%, find the size of the initial loan to the nearest dollar.

Respuesta :

meerkat18
Given:
Future Value = $75,210
term = 8 years
rate = 8.5%
Initial loan = ?

In this case, we need to find the present value of the loan. Compounded means that even the interest has an interest.

PV = FV / (1 + i)^n

PV = 75,210 / (1 + 0.085)⁸

PV = 75,210 / (1.085)⁸

PV = 75,210 / 1.9206

PV = 39,159.64

Initial loan is $39,159.64
total interest is $75,210 - 39,159.64 = $36,050.36

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