A small business owner visits her bank to ask for a loan. The owner states that she can repay a...

Question:

A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,700 per month for the next three years and then $3,400 per month for two years after that. If the bank is charging customers 9.25 percent APR, how much would it be willing to lend the business owner?

Monthly Payments:

Loans are often structured to be repaid through monthly payments. These monthly payments are calculated at the present value of these payments, discounted at the interest rate on the loan, and equal to the amount borrowed.

Answer and Explanation:

The amount the bank will be willing to lend is $ 109,571.57.

The amount that the bank will be willing to lend is the present value of the payments by...

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Calculating Monthly Loan Payments

from Remedial Algebra I

Chapter 25 / Lesson 8
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