Suppose a business takes out a $7,000, five-year loan at 6 percent that will be paid...
Suppose a business takes out a $7,000, five-year loan at 6 percent that will be paid annually with a single, fixed payment each period. How much will be the annual payment?
Multiple Choice
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$1,661.88
-
$627.88
-
$1,400.00
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$313.98
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$1,854.88
Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
7000=Annuity[1-(1.06)^-5]/0.06
7000=Annuity*4.212363786
Annuity=7000/4.212363786
which is equal to
=$1661.88(Approx).
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