A company purchased equipment and signed a 7-year installment loan at 9% annual interest.The annual payments equal $9,000.The present value of an annuity factor for 7 years at 9% is 5.0330.The present value of a single sum factor for 7 years at 9% is 0.5470.The present value of the loan is:
A)$9,000.
B)$4,923.
C)$16,453.
D)$63,000.
E)$45,297.

Question

Quizplus · Accepted Answer

The present value of the loan can be calculated using the formula:

Present value of loan = Annual payment x Present value of annuity factor for n years at r% - Present value of single sum factor for n years at r%

Substituting the given values, we get:

Present value of loan = $9,000 x 5.0330 - 0.5470
Present value of loan = $45,297

Therefore, the best choice is E, as it is the only option that matches this calculated value.

A Company Purchased Equipment and Signed a 7-Year Installment Loan