Question 1183460
he borrowed 250,000 from the bank at 6% discount rate.


he agreed to pay them back that amount in 5 years.


what i understand from this is that the bank expects him to pay them 250,000 in 5 years.


since the bank needs to make 6% a year on their investment, you are looking for the present value of a future value of 250,000.


the formula to use is f = p * (1 + r) ^ n


f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.


in this problem, the formula becomes:


250,000 = p * 1.06 ^ 5.


divide both sides of this equation by 1.06 ^ 5 to get:


250,000 / 1.06 ^ 5 = p


solve for p to get:


p = 186,814.5432.


that's how much he would get now if he promises to pay the bank 250,000 five years from now.


if he needed 250,000 now, then the formula becomes:


f = 250,000 * 1.06 ^ 5 = 334,556.3944.


that's how much he would have to pay the bank back in 5 years if he needed to have 250,000 now.