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devlian [24]
4 years ago
12

Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his fr

iend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment.
Required:
Calculate the annual payment.

Business
1 answer:
kiruha [24]4 years ago
4 0

Answer: $7,716.76

Explanation:

Ian's friend will have to pay a specific annual payment per year so this is an annuity.

The $25,000 is the present value of the payments.

25,000 = Annuity * Present Value interest factor of Annuity, 9%, 4 years

25,000 = Annuity * 3.2397

Annuity = 25,000/3.2397

= $7,716.76

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