Question

A company borrowed $40,300 cash from the bank and signed a 3-year note at 10% annual interest. The present value of an annuity factor for 3 years at 10% is 2.4869. The present value of a single sum factor for 3 years at 10% is .7513. The annual annuity payments equal:
Multiple Choice

$30,277.39.

$16,204.91.

$40,300.00.

$53,640.36.

$100,222.07.

Answer 1

Answer:

$16,204.91

Explanation:

The computation of the annual payments would be equal to

= Borrowed amount from the bank ÷ present value of an annuity factor for 3 years at 10%

= $40,300 ÷ 2.4869

= $16,204.91

We simply divide the borrowed amount from the bank by the present value of an annuity factor for 3 years at 10 so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it