Jordyn Company borrows $600,000 cash from a bank and in return signs an installm
ID: 2345553 • Letter: J
Question
Jordyn Company borrows $600,000 cash from a bank and in return signs an installment note for five annual payments of equal amount, with the first payment due one year after the note is signed. Use Table B.3 to compute the amount of the annual payment for each of the following annual market rates: (a) 4%, (b) 6%, and (c) 8%. (Round "PV Factor" to 4 decimal places. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)
(a) 4% Payment $
(b) 6% Payment $
(c) 8% Payment $
Explanation / Answer
annual payment A = P {(r(1+r)n} / {(1+r)n - 1}
P=600000
n = 5
a) r = 4%=0.04
A = 600000 {(0.04(1+0.04)5} / {(1+0.04)5 - 1} = 134776
b) r = 0.06
A = 600000 {(0.06(1+0.0465} / {(1+0.06)5 - 1} = 142437
c) r = 0.08
A = 600000 {(0.08(1+0.0485} / {(1+0.08)5 - 1} = 150273
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