Question

Lowlife Company defaulted on a $250,000 loan that was due on December 31, 2021. The bank has agreed to allow Lowlife to repay the $250,000 by making a series of equal annual payments beginning on December 31, 2022. Required: Calculate the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021. 1. Calculate the required annual payment if the bank's interest rate is 10% and four payments are to be made. 2. Calculate the required annual payment if the bank's interest rate is 8% and five payments are to be made, 3. If the bank's interest rate is 10%, how many annual payments of $51,351 would be required to repay the debt? 4. If three payments of $104,087 are to be made, what interest rate is the bank charging Lowlife?

Answer 1

PC HP WW interest W tun Ansunen Page: No 0 Annual payment wishers interests ouate is payments care este buen made. Present value of annuély = Annuiting amount x Present value of an annuity due of 1 1-(1 + foy á 50,000 - Annuity amount x2 104 250,000 - Ann ont X 3.16987 Annuly amount = .050,000 3.16987 = 488 67.58 g 8868 si Annuity amount = $ 78868 P: Annual payment when terest orate is 10%. and 4 paymentseerne to be made = $78868 @ Hanun payment we nt intervento create size and payments are to be made Present value of annuity = Annuity amount X Present value of an ... annuity due of $

250,000 = Annuity amount x Annuity amount x 1-07875 Page.nio @ a 250,000 - Annuity amount X 3.99241 Annuity amount. - 250,000 3.992741 i = 62614.11. A 62614 .: Annuity amount = $62614 It Annual payment when interest rate is 8% and to payments are to be made = $ 62614 © Number of annual payments would be required to repay the debt Present value of annuity = Annuity amount y Present value of an annuing 250,000 - $51351 Present value of an annuity of $1 Present value of an annuity of $1 350,000 ...51351 = 4.86845 rate = 1044 The banko interest

Page: No !-(1+10%) = 4186845 (ime No.of years) 107 * = 486845 X 107 1-(1)-9 = 0.486845 1 -0.486845 - (0,05 01513155 = 1,* apply In on both sides In (0-513155) = ln (0:1)" + 0.66177 = timin (1) 0.667177 0.095310) iin = 7 1 1. No. of years'- 7 payments ② Interest rate that bank will be charging a when 3 payments are made. one 3 payments : Present value of annály = Annuity amount x Present value of an

Page: No 250,000 = $104081 x Prebent value of an annulyft 1 Present value of an annuvilis of $13 250,000 104087 = 2,4018369 - 2 2:40184 : No. of years - 3 payments from present value of an annuity of $1 table, at Present value of an annuély of $1 = 2.40184 No. of yearson = 3 years The interestrate is 12% :. Interest orate = 12%.