How much can I borrow?

Problem

On January 1st, 2004, you 'll borrow an amount which is to be paid off in 24 monthly installments of $40, starting on February 1st. Interest is at 5 % compounded annually.

How much can you borrow?

Solution

Set up the following cash flow or open the "Loan - Borrow" example in the Help examples folder.

Comment	Type	Occurs	Date	Amount	Occurrences	Change	Step
Loan	unknown	once	1-1-2004	1
Payment	inflow	monthly	2-1-2004	40	24	(no change)

Enter 5 into the rate field and select annual compounding. Make sure that auto update is checked.

You'll find the anwser in the multiplication value field: -912.83.

Please note that this is a negative amount, since we entered payments as inflows. You could just as well have entered them as outflows, but then no IRR would have been calculated.