Question

Present and future value tables of $1 at 3% are presented below. N PV 51 PV 51 VVA 31 PVA 31 PVAD SU PVAD SI 1 1.03000 10.97087 1.0000 0.97087 1.0300 1.00000 2 1.06090 10.94260 2.0300 1.91347 2.0909 | 1.97087 3 1.09273 10.915143.09092.82861 3.1836 2.91347 4 1.12551 0.88849 4.18363.71710 4.30913.82861 5 1.15927 0.862615.3091 4.579715.46844 .71710 61.19405 0.83748 6.46845 .417196.66255 .57971 7 1.22987 0.813097.6625 6.23028 7.89236.61719 8 1.26677 10.789418.89237.01969 9.1591 7.23028 91 .30477 10.7664210.15917.7861110.4639 8.01969 10 11.34392 10.74409 11.463918.53020 11.80788.78611 11 1.38423 0.7224212.80789.25262 13.1920 9.53020 12 1.42576 10.70138 14.1920 9.95400 14.6178 10.25262 1 1.46853 0.68095 15.6178 10.6349616.0863 10.95400 14 1.51259 0.66112 12086 2.2960712.5989 11.63496 15 1.557970.60186 18.5989 11.93794 19.1569 12.20607 16 1.60471 0.62317 20.1569 12.5611020.7616 12.93794 6% What is the amount of each payment? Rosie's Florist borrows $390,000 to be paid off in four years. The loan payments are semiannual with the first payment due in six months, and interest is

Answer 1

Borrowing = $390,000

Time period (n) = 4 year or 8 semi annual period

Effective interest rate for semi annual period (i) = 3%

Each payment = ?

Borrowings = Each payment x Present value ordinary annuity factor (i%, n)

390,000 = Each payment x PVAF (3%, 8)

390,000 = Each payment x 7.01969

Each payment = 390,000/7.01969

= $55,558

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