Your company has received a $50,000 loan from an industrial finance company. The annual payments are $6,202.70. If the company is paying 9% interest per year, how many loan payments must the company make?

Question

Quizplus · Accepted Answer

The number of loan payments can be found using the formula for the present value of an annuity: $PV = PMT \times \left(\frac{1 - (1 + r)^{-n}}{r}\right)$, where PV is the present value (loan amount), PMT is the annual payment, r is the annual interest rate, and n is the number of payments. Rearranging the formula to solve for n gives: $n = \frac{\log(1 - \frac{PV \times r}{PMT})}{\log(1 + r)}$. Substituting the given values ($PV = 50,000$, $PMT = 6,202.70$, $r = 0.09$) into the formula and solving for n yields approximately 15 payments.

Your Company Has Received a $50,000 Loan from an Industrial