Hey tomkoolen.
I think (but I'm not certain) that you need to find the present value of the actual interest without the principal. Try applying the concept of present value to the interest part only without the principal and see how you go.
Hello everyone,
I can perform all high school calculations regarding present value/future value problems, however I have come across a problem of which I simply cannot seem to grasp the concept.
"Person A has to repay a loan in 7 yearly payments. Each payment consists of €1000. The first payment takes place at 31/12/2013 and the last at 31/12/2019. There is a compound interest of 5% per year.
Calculate the present value of the interest at:
a) 1/1/2013
b) 31/12/2013
c) 1/1/2007
d) 31/12/2003"
I am sorry I cannot show any work, but I simply do not understand what exactly is meant by the question. I know that for compound interest I have to use the formula FV = PV(1+i)^n and that I have to calculate a summation of n terms when regarding n different payments, but if anyone could show me what I need to do here, I would be very thankful.
Thanks in advance,
Tom Koolen
Hey tomkoolen.
I think (but I'm not certain) that you need to find the present value of the actual interest without the principal. Try applying the concept of present value to the interest part only without the principal and see how you go.