Peabody Books Inc wishes to borrow $182,000 today for the purchase of

Peabody Books Inc wishes to borrow $182,000 today for the purchase of publishing materials. They have an agreement with their commercial banker that they can borrow money at an annual rate of 4.75%.

How much will the firm owe if they repay the loan in exactly one year?
A) $8,645
B) $173,747.02
C) $182,000
D) $190,645

ANSWER

D
Explanation: D) FV = PV(1 + r)^n = $182,000 * (1.0475)^1 = $190,645.