Answer to Question #318756 in Financial Math for Tebogo

Question

Mabel borrowed an amount of money from her father.The loan will be paid back by means of R25000 each every second month for six years,an interest of 7,5% per year,compounded every two months,will be applicable,The amount of loan is

Answer 1

The present value, PV, of the loan is

$PV=Pmt[\frac{1-\frac{1}{(1+\frac{r}{m})^{nm}}}{\frac{r}{m}}]$

Where Pmt is R25000,

n is 6,

m is 6,

r is 0.075(7.5%)

$\therefore R25000[\frac{1-\frac{1}{(1+\frac{0.075}{6})^{6×6}}}{\frac{0.075}{6}}]$

$PV=R721181.68$

The amount of money Mabel borrowed is R721181.68