Present and future value tables of $1 at 11% are presented below.

-Titanic Corporation leased executive limousines under terms of $20,000 to be paid at the inception of the lease, and four equal annual payments of $30,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be:
A) $13,200.
B) $10,238.
C) $33,200.
D) $15,543.

Question

Present and future value tables of $1 at 11% are presented below.

-Titanic Corporation leased executive limousines under terms of $20,000 to be paid at the inception of the lease, and four equal annual payments of $30,000 to each be paid thereafter on the anniversary date of the lease. The interest rate implicit in the lease is 11%. The first year's interest expense would be:
A) $13,200. 
B) $10,238. 
C) $33,200. 
D) $15,543.

Quizplus · Accepted Answer

PVA = $30,000 × 3.10245* = $93,074
$93,074 × 11% = $10,238
*PVA of $1: n = 4; i = 11%

Present and Future Value Tables of $1 at 11% Are