Edgar has a trust fund that should pay him $20,000 at the end of next year

Finance Aug 15, 2020

Edgar has a trust fund that should pay him $20,000 at the end of next year. If a bank loans money at an interest rate of 7.5% (APR), how much money can he borrow from the bank now based on the money he should receive later?

Expert Solution

PV of Cash Flow = CF / 1+r

= $ 20,000 / ( 1 + 0.075)

= $ 22,000 / 1.075

= $ 20465.1

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