Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jackson has a loan that requires a $17,000 lump sum payment at the end of four years.The interest rate on the loan is 5%,compounded annually.How much did Jackson borrow today?
A)$16,150
B)$13,600
C)$11,504
D)$13,986
E)$15,343

Question

Present Value of 1  Future Value of 1  Present Value of an Annuity of 1  Future Value of an Annuity of 1  Jackson has a loan that requires a $17,000 lump sum payment at the end of four years.The interest rate on the loan is 5%,compounded annually.How much did Jackson borrow today?
A)$16,150 
B)$13,600 
C)$11,504 
D)$13,986 
E)$15,343

Quizplus · Accepted Answer

To find the present value of the loan, we need to use the formula for present value of a single sum:

PV = FV / (1 + r)n

Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

In this case, FV is $17,000, r is 5%, and n is 4 years. So we have:

PV = $17,000 / (1 + 0.05)4
PV = $13,986.03

Therefore, Jackson borrowed $13,986.03 today, which is closest to answer choice D ($13,986).