Daley Co.lends $524,210 to Davis Corporation.The terms of the loan require that Davis make six
semiannual period-end payments of $100,000 each.What semiannual interest rate is Davis paying on
the loan?

Question

Quizplus · Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
$524,210 = $100,000 * Interest Factor; Interest Factor = 5.2421
5.2421 is the interest factor on the Present Value of an Annuity table; n = 6; i = 4%
Davis is paying a 4% semi-annual rate or an 8% annual rate of interest

Daley CoLends $524,210 to Davis Corporation