Question

On December 31, 2018, Wasley Corporation borrowed $500,000 on a 10%, 10-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2019.

Required

a. Compute the amount of the semiannual installment payment using a financial calculator or Excel, and round amount to the nearest dollar.

Answer 1

$40,121.29

Step-by-step explanation:

The amount to be paid as semi-annual equal equipment can be calculated using a calculator using the inder listed parameters as follows:

Semi-annual equal installment = Loan amount/Annuity factor

Annuity factor = (1- (1+r)^(-n))/r

Parameters to be used include

r- 10/2 = 5%, n- 2× 10 = 20,

Annuity factor = ( 1- (1.05)^(-20) )/0.05

= 12.4622

Semi-annual equal installment

= 500,000/12.4622

= $40,121.29