Southland,Inc.has just borrowed $50,000 to purchase a delivery truck.The contract calls for 4 annual payments of $15,773.54,beginning one year from today.The annual interest rate Southland is paying equals:

Question

Quizplus · Accepted Answer

To find the annual interest rate Southland is paying, we need to use the formula for calculating the present value of an annuity:

PV = PMT x [1 - (1+i)^-n]/i

Where PV is the present value, PMT is the payment amount, i is the annual interest rate, and n is the number of periods (in this case, 4).

Substituting the given values, we get:

$50,000 = $15,773.54 x [1 - (1+i)^-4]/i

Solving for i, we get:

i = 10%

Therefore, the annual interest rate Southland is paying equals 10%.