You need to borrow funds for 2 weeks but can only get a discount loan with a sta

ID: 2752568 • Letter: Y

Question

You need to borrow funds for 2 weeks but can only get a discount loan with a stated rate of interest of 7.5%.

Answer below:

1. Amount you need in cash:

6. If you need to have $100,000 in cash, how much should you borrow?

7. X - [(.075/52) x 2]X = 100,000

X = 100,000/1- [(.075/52)x2]

Solve for X and show your work

(You should get the same answer as the dollar amount in the section of Amount you should borrow above)

1. Amount you need in cash:

2. Annual Interest Rate: 3. Length of Loan (weeks): 4. Loan Periods in a Year: 5. Amount you should borrow:

Amount to be borrowed = $ 100000 * (1+(0.075/52))^2

= $ 100,000 * (1+0.0014423)^2

= $ 100,000 * (1.0014423)^2

= $ 100,000 * 1.0028866956

= $ 100288.669563 or $ 100,289 (rounded off)

Point No 7

X – [(0.075/52)] * 2]*X = 100,000

X * (1-((0.075 /52)*2)) =100,000

X = 100000/(1-((0.075 /52)*2))

= 100000 / (1- (0.0014423)*2))

= 100000/(1-0.0028846154)

= 100000/0.99711538462

= 100289.2960 or $ 100289 (rounded off)

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