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

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Solution : Revoirement : Calculate the required annual payment is the bank's interest rate is lot and four payments are to be Annuity amount = pral Annuity factor = 8210.00 978868 a payment Annuity amount 3.16987* ② present value of an ordinary annuity of $ 1:n= 4, i= 10%. (from table 4) Requirement @ calculate the reapsired annual payment five payments are to be it the made. bania's interest rate is 81 and Annuity amount = PVA | Annuity factor Annuity amount = 1250000 3.99271* - $62614 - payment present value of an ordinary annuity of 18 n=5, in 8t. (from table 4)

Requirement . If the bank's interest rate is 104. how payments of $51351 many the annual debt? would be reaquired to repay Annuity factor : PVA | Annuity factor Annuity factor - 250000 $51351 - 4.86845 * present value of an ordinary annuity of (from table 4, n= approximately 7 fun=a is 10t payments). Requirement 4: If three payments of & 104087 are to be made, what interest rate is the bank Charging Lowlife & Annuity factor - PVA/Annuity factor Annuity factor & $250000 & 104087 -2.40184 & present Value of an ordinary annuity (from table u is approximately of & 1: n=3, i= ?