Choice and Cost Benefit Analysis > Present Value

Car Loan

Suppose you are thinking of buying a new car. The dealer offers to loan you $20,000 in exchange for a payment of $5,000 at the end of each of the next five years. What is the present value of the loan if the interest rate is 7%?

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 08/17/2016