A company borrows money from the bank by promising to make 6 annual year-end payments of
$25,000 each.How much is the company able to borrow if the interest rate is 9%?

Question

Quizplus · Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
Present Value of an Annuity = $25,000 * 4.4859 = $112,147.50
4.4859 is the interest factor on the Present Value of an Annuity table; n = 6; i = 9%

A Company Borrows Money from the Bank by Promising to Make