borrowing (present value)

[Khb_taylors]

You need some money today and the only friend you have that has any is your miserly friend. He
agrees to loan you the money you need, if you make payments of $15 a month for the next nine
months. In keeping with his reputation, he requires that the first payment be paid today. He also
charges you 2 percent interest per month. How much money are you borrowing?

 

[tkhunny]

You'll have to be a hair more clear. Since you are paing back $15 TODAY, are you REALLY borrowing that? It makes a difference of $15 in the answer.

At face value, it says 2% PER MONTH. That may be illegal in some states.

i = 0.02
v = 1/(1+i)

Starting with TODAY

$15*(1 + v + v^2 + ... + v^8)

Forgetting about today - It's really only 8 payments.

$15*(v + v^2 + ... + v^8)