Net present value of the loan


Terry Martinez is considering taking out a loan to purchase a desk. The furniture store manager rarely finances purchases, but will for Terry "as a special favor." The rate will be 10% per year, and because the desk costs $600, the interest will come to $60 for a one-year loan. Thus, the total price is $660, and Terry can pay it off in 12 installments of $55 each. Use the interest rate of 10% per year to calculate the net present value (NPV) of the loan? Based on this interest rate, should Terry accept the terms of the loan.

Solution Preview :

Prepared by a verified Expert
Finance Basics: Net present value of the loan
Reference No:- TGS0551488

Now Priced at $20 (50% Discount)

Recommended (96%)

Rated (4.8/5)