SOLUTION: Jeremy Fenloch borrowed some money from his friend and promised to repay him the amounts of $1,255, $1,365, $1,525, $1,560, and $1,585 over the next five years. If the friend norma

Question 1081025: Jeremy Fenloch borrowed some money from his friend and promised to repay him the amounts of $1,255, $1,365, $1,525, $1,560, and $1,585 over the next five years. If the friend normally discounts investments cash flows at 8.50 percent annually, how much did Jeremy borrow? (Round answer to 2 decimal places, e.g. 15.25.)

Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
he pays back the following sums of money at the end of each year.

year 1 = 1255
year 2 = 1365
year 3 = 1525
year 4 = 1560
year 5 = 1585.

you want to get the present value of all these cash flows at 8.5% per year.

that present value will be equal to:

1255 / 1.085^1 + 1365 / 1.085^2 + 1525 / 1.085^3 + 1560 / 1.085^4 + 1585 / 1.085^5

the result of that is equal to $5689.88

that's how much jeremy borrowed.

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