Question

fe Company defaulted on a $250,000 loan that was due on December 31, 2021. The bank has agreed to allow Lowlife to repay the $250,000 by making a series of equal annual payments beginning on December 31, 2022. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. Calculate the required annual payment if the bank’s interest rate is 10% and four payments are to be made.2. Calculate the required annual payment if the bank’s interest rate is 8% and five payments are to be made.3. If the bank’s interest rate is 10%, how many annual payments of $51,351 would be required to repay the debt?4. If three payments of $104,087 are to be made, what interest rate is the bank charging Lowlife?

Answer 1

1) payment of $ 78,867.70

2) payment of $ 62,614.11

3) 7 years

4) rate of 12%

Step-by-step explanation:

On the first and second point we need to solve for the PMT:

`PV / (1-(1+r)^(-time) )/(rate) = C\\`

PV $250,000.00

time 4

rate 0.1

`250000 / (1-(1+0.1)^(-4) )/(0.1) = C\\`

C $ 78,867.701

`PV / (1-(1+r)^(-time) )/(rate) = C\\`

PV $250,000.00

time 5

rate 0.08

`250000 / (1-(1+0.08)^(-5) )/(0.08) = C\\`

C $ 62,614.114

In the third one we need to solve for time:

`C * (1-(1+r)^(-time) )/(rate) = PV\\`

C $51,351.00

time n

rate 0.1

PV $250,000.0000

`51351 * (1-(1+0.1)^(-n) )/(0.1) = 250000\\`

we work to reach this expression:

`(1+0.1)^(-n)= 1-(250000*0.1)/(51351)`

ANd we acn use logarithmics properties to solve for n

[tex]-n= \frac{log0.51315456368912}{log(1+0.1)

-n = -7.000072677

n = 7 years

Lastly, on the fourth, we need to solve for the rate, which is done using excel if we want an exact result and save time.

we list each value.

-250,000

104, 087

104, 087

104, 087

And calculate IRR by selecting this values.

12.0%