1. A promise to repay $93,000 eight years from now at an interest rate of 9%. 2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual interest rate is 4%.

1. A promise to repay $93,000 eight years from now at an interest rate of 9%. 2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual interest rate is 4%.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Compute the amount that can be borrowed under each of the following circumstances: (PV of $1. FV of $1. PVA of $1, and FVA of $1)
(Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.)
1. A promise to repay $93,000 eight years from now at an interest rate of 9%.
2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual
interest rate is 4%.
Option 1
Loan amount
Option 2
Annual payments
Table Value
Table Value
Amount
Amount
Present Value
Present Value

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