Question 982290
you will be discounting the payments at 10% per year.
the first payment is 1 yeqr from now.
the second payment is 6 years from now.
the present value of each of the payments are:
first payment = 500 / 1.10
second payment = 500 / 1.10^2
third payment = 500 / 1.10^3
fourth payment = 500 / 1.10^4
fifth payment = 500 / 1.10^5
sixth payment = 500 / 1.10^6
add up all of the present values and you get:
present value of the loan is equal to 2,177.63
if you put the right number in a financial calculator, it will tell you the same thing.
here's a financial calculator that you can use.
<a href = "http://www.arachnoid.com/lutusp/finance.html" target = "_blank">http://www.arachnoid.com/lutusp/finance.html</a>
you would make the following entries:
present value = 0
future value = 0
number of payments = 6
payment = -500
interest rate per period, % = 10
payment at: end
you would then click on PV and you would get the present value of 2,177.63