Gwen Taylor borrows $50,000 from her bank on January 1.She is to repay the loan in equal annual installments over 30 years.How much is her annual repayment if the bank charges 10 percent interest? Present value tables or a financial calculator are required.

Question

Quizplus · Accepted Answer

The annual repayment can be calculated using the formula for an annuity. The formula is: P = [r*PV] / [1 - (1 + r)^-n], where P is the annual payment, r is the interest rate, PV is the present value, and n is the number of periods. Plugging in the values: r = 0.10, PV = $50,000, n = 30, the annual repayment is approximately $5,304.

Gwen Taylor Borrows $50,000 from Her Bank on January 1