Question

A company borrowed $40,000 cash from the bank and signed a 6-year note at 7% annual interest. The present value of an annuity factor for 6 years at 7% is 4.7665. The present value of a single sum factor for 6 years at 7% is 0.6663. The annual annuity payments equal:

Answer 1

The present value (PV) of an annuity of P equal periodic payments for n years at r% is given by:


where  is the present value of an annuity factor for n years at r%.
Given that a company borrowed $40,000 cash from the bank and signed a 6-year note at 7% annual interest and that the present value of an annuity factor for 6 years at 7% is 4.7665.
Then..


Therefore, the annual annuity payments equals $8,391.90