Question

Kazali Industries purchased a machine from Keefe Corporation on October 1, 2016. In payment for the $432,000 purchase, Kazali issued a one-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%. Monthly installment payments are:

1) $36,000
2) $37,335
3) $38,004
4) $38,382

Answer 1

The question is based on the calculation of installment payments for a business purchase and bond valuation in light of changing interest rates. It involves business, finance, and accounting concepts such as the time value of money, interest calculations, and loan amortization.

Step-by-step explanation:

The student's question involves the calculation of the monthly installment payments for a machine purchase of $432,000 using an installment note with a 12% annual interest rate. This topic falls under the subject of Business, specifically in the areas of finance and accounting. To solve this, we utilize the concept of the time value of money to calculate the monthly payments that include principal and interest.

Additionally, in another example, we explore the aspect of bond valuation in the context of changing interest rates. Here, we determine if the price of a bond would increase or decrease relative to its face value based on the prevailing market interest rate and compute the bond’s price accordingly. Lastly, in a loan scenario, we calculate the monthly payment and total cost of a $1,000,000 house loan over 30 years at a given interest rate.