Your firm intends to finance the purchase of a new construction crane. The cost is $1,500,000. How large is the payment at the end of year ten if the crane is financed at a rate of 8.50% as a discount loan?
A) $228,611.56
B) $127,500
C) $3,391,475.16
D) There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

In a discount loan, the interest is deducted from the principal upfront. The future value of the loan at the end of year ten can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal ($1,500,000), r is the interest rate (8.50%), and n is the number of years (10). This results in a future value of $3,391,475.16.

Your Firm Intends to Finance the Purchase of a New