Gwen Taylor borrows $50,000 from her bank on January 1

Accounting Mar 13, 2021

Gwen Taylor borrows $50,000 from her bank on January 1. She is to repay the loan in equal annual installments over 30 years. How much is her annual repayment if the bank charges 10 percent interest? Present value tables or a financial calculator are required.

$1,667
$4,200
$2,865
$5,304

Expert Solution

Answer:

D . $ 5,304

Step-by-Step explanation

Present value of annuity = Annuity * [{ 1 - 1/(1+r) ^n} / r]

$50,000 = A * [{1 - 1/(1.1 )^30} / 0.10]

A = $50,000 / 9.43 = $5,304

Therefore, Gwen Taylor's annual payment will be $5,304.

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