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telo118 [61]
3 years ago
7

Lang Warehouses borrowed $146,960 from a bank and signed a note requiring 10 annual payments of $19,032 beginning one year from

the date of the agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the interest rate implicit in this agreement. (Round interest rate to 1 decimal place.)
Business
1 answer:
Oksanka [162]3 years ago
8 0

Answer:

The interest rate is 5%

Explanation:

Loan amortization is a method of loan repayment where a series of equal periodic installments is made by the borrower to offset the entire loan obligation. Each equal repayment covers the interest due on the loan so far and a portion of the principal amount.

At the beginning of the loan contract, the borrower is usually provided with information on the number of equal repayment installments that, if consistently paid, would offset the entire loan obligation (principal plus interest)

This is determined as follows:

repayment installment= Loan amount/Annuity factor

A special table called the Present Value of Annuity table is used to determined the annuity factor. All you need to use the table is the loan repayment period (years) " N " and the agreed interest rate " r "

So we apply this to question:

19,032= 146,960/ Annuity factor

Annuity factor= 146,960/19,032= 7.7217

We can look up this same figure in the table, to ascertain the the number of years and the rate rate. The number of years is already given as 10.

So we look up for the figure 10 under the the column labeled "n" , trace it through the row vertically to locate 7.7217. The rate that gives this figure is the applicable interest rate. This rate will be located by tracing upward from the point where we found 7.7217.

The interest rate is 5%

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What is the best way to pursue a leadership position?
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3 years ago
You have just won the state lottery and have two choices for collecting your winnings. You can collect $100,000 today or receive
WINSTONCH [101]

Answer:

The present value Option 1 = $100,000

The present value Option 2 =$97.368,57‬

Explanation:

The formula to calculate Present Values is equal to:

Present Value = FV / (1+r) ∧n

Let´s calculate Present Value for Option 2:

PV1 =   $20,000 / (1+0,10) ∧ 1= $18,181.82

PV2 =  $20,000 / (1+0,10) ∧ 2= $16,528.92

PV3 =  $20,000 / (1+0,10) ∧ 3= $15,026.29

PV4 =  $20,000 / (1+0,10) ∧ 4= $13,660.26

PV5 =  $20,000 / (1+0,10) ∧ 5= $12,418.42

PV6 =  $20,000 / (1+0,10) ∧ 6=  $11,289.47

PV7 =  $20,000 / (1+0,10) ∧ 7= $10,263.16

PV1 + PV2 +PV3 +PV4 + PV5 + PV6 + PV7 = $97.368,57‬

3 0
3 years ago
The following data pertain to an investment proposal: Required investment $75,000 Annual cash savings $18,000 Projected life of
ehidna [41]

Answer:

Explanation:

Using a financial calculator, input the following using CF function;

Initial Investment ; CF0 = -75,000

Yr1 cashflow ; C01 = 18,000

Yr2 cashflow ; C02 = 18,000

Yr3 cashflow ; C03 = 18,000

Yr4 cashflow ; C04= 18,000

Yr5 cashflow ; C05 = 18,000

Yr6 cashflow ; C06 = 18,000

Yr7 cashflow ; C07 = 18,000

Yr8 cashflow ; C08 = 18,000 +4,000 = 22,000

Required rate of return = 16%

then compute Net present value by keying in NPV, CPT = $4,404.74

5 0
3 years ago
Your neighbor Bob has two annuities. The first annuity will pay him $10,000 per month for the next 10 years. The second annuity
german

Answer:

$1,643,344.308

Explanation:

These are Ordinary annuities because if it is not mentioned that the payments are made at the <em>beginning </em>of the year which is the case for Annuity Due.

You can use a financial calculator to find the Present value of these two ordinary annuities.

<u> PV of Annuity 1 from (yr1-yr10)</u>

Recurring payment; PMT = 10,000

Total duration ; N = 10 *12 = 120 months

Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%

Future value ; FV = 0 (use 0 if annuity variable is not given )

then CPT PV= $900,734.533

<u>PV of Annuity 1 from (yr11-yr20)</u>

This will happen in 2 steps sice it is a forward-starting annuity;

Recurring payment; PMT = 15,000

Total duration ; N = 10 *12 = 120 months

Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%

Future value ; FV = 0 (use 0 if annuity variable is not given )

then CPT PV( at t=10)= $1,351,101.80

Next find the PV of $1,351,101.80  at t=0;

$1,351,101.80 /(1.005^120) = $742,609.7754

Next, find the sum of these two PVs to find the answer;

=$900,734.533 + $742,609.7754

PV = $1,643,344.308

6 0
3 years ago
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