VB owes a $200,000,8%,five-year note payable dated January 1,2020.It is the end of year 2020,and instead of making the interest payment now due,VB has made arrangements to pay the debt and the 2020 interest payment in four equal instalments based on the same interest rate.The first payment is to be made on January 1,2021.The amount of the equal annual payments is (rounded to the nearest dollar):

Question

Quizplus · Accepted Answer

The total amount to be paid by VB will be the sum of the principal and the interest. Using the formula for a present value of an annuity, we can find the annual payment needed:

Annual payment = PV x (r / (1 - (1 + r)^-n))

Where PV is the present value of the note, r is the interest rate, and n is the number of periods (in this case, 4).

PV = $200,000 
r = 8% = 0.08 
n = 4

Annual payment = $200,000 x (0.08 / (1 - (1 + 0.08)^-4))
Annual payment = $60,384 (rounded to the nearest dollar)

Therefore, the correct answer is B, $60,384.

VB Owes a $200,000,8%,five-Year Note Payable Dated January 1,2020