00:01
So here we have a question about present valuing some things.
00:05
We have taken, well, susan has taken a loan of $41 ,500 two years ago to start a new business.
00:11
And she is going to repay it in three equal installments.
00:14
Now, three years from now, and four years from now.
00:17
I'm going to ask what the size of the equal installments, if the interest is 6 % compounded monthly.
00:25
So the key to doing this is thinking, we basically are going to work in the value of the $41 ,500.
00:33
We will just put everything back into, we'll present value everything back to when susan took out the loan.
00:44
So you can think about it this way.
00:46
She took out a loan.
00:49
I guess recall the formula that present value is equal to future value over 1 plus rate over n to the nt.
00:58
So what this means for us is we're going to future value all the loan payments.
01:01
All the loan payments, let's say, have a common value p.
01:04
So for instance, the loan payment made now, when we present value it back those years, it's going to be 1 plus r over n.
01:11
And then this is going to be minus nt, but it's going to be minus 2n because two years...