Asked by Willow Stevens on May 17, 2024
Verified
A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each.How much is the company able to borrow if the interest rate is 9%?
Annual Year-end Payments
Payments made at the end of a fiscal year, often related to taxes, dividends, or bonuses.
Interest Rate
The percentage of a sum of money charged for its use, often expressed annually.
- Acquire knowledge on the essentials of loans and interest rates, inclusive of the calculation of loan installments and overall amounts loaned.
- Consider investment or lending situations for prudent financial decision-making.
Verified Answer
MT
Marisia TuraganivaluMay 19, 2024
Final Answer :
$121,119
Present Value of an Annuity = Annuity * PV Factor
Present Value of an Annuity = $27,000 * 4.4859 = $121,119
4.4859 is the PV factor on the Present Value of an Annuity table; n = 6; i = 9%
Present Value of an Annuity = Annuity * PV Factor
Present Value of an Annuity = $27,000 * 4.4859 = $121,119
4.4859 is the PV factor on the Present Value of an Annuity table; n = 6; i = 9%
Learning Objectives
- Acquire knowledge on the essentials of loans and interest rates, inclusive of the calculation of loan installments and overall amounts loaned.
- Consider investment or lending situations for prudent financial decision-making.