John Doeber borrowed $125,000 to buy a house

Business Oct 07, 2020

John Doeber borrowed $125,000 to buy a house. His loan cost was 11% and he promised o repay the loan in 15 equal annual payments. How much are the annual payments? A) $3,633 B) $9,250 C) $13,113 D) $17,383

Expert Solution

The annual payments are an annuity, the present value of which is 125,000. The time period is 15 and the rate is 11%. We get

125,000= Payment X PVIFA (15,11%)
Payment = 125,000/PVIFA (15,11%)

Using the PVIFA table, the factor is 7.191

Payment = 125,000/7.191=17,383

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote