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:

Question

Quizplus · Accepted Answer

To calculate the annual annuity payments, we can use the formula:

Annual Payment = Principal amount x (Interest rate / Present value of annuity factor)

Plugging in the given values, we get:

Annual Payment = $40,000 x (0.07 / 4.7665) = $8,391.90

Therefore, the correct answer is A) $8,391.90. The other answer choices are incorrect as they either do not correspond with the given information or do not make mathematical sense.

A Company Borrowed $40,000 Cash from the Bank and Signed