Question

On December 31, 2018, Wasley Corporation borrowed $500,000 on a 10%, 10-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2019.
Required

a. Compute the amount of the semiannual installment payment using a financial calculator or Excel, and round amount to the nearest dollar.

Answer 1

Answer:

$40,121.29

Explanation:

The amount to be paid as semi-annual equal equipment can be calculated using a calculator using the inder listed parameters as follows:

Semi-annual equal installment = Loan amount/Annuity factor

Annuity factor =  (1- (1+r)^(-n))/r

Parameters to be used include

r- 10/2 = 5%,  n- 2× 10 = 20,

Annuity factor = ( 1- (1.05)^(-20) )/0.05

                       = 12.4622

Semi-annual equal installment

= 500,000/12.4622

=  $40,121.29