On January 1, Year 1, Turner Company borrowed $58,000 from Lessing Inc. and signed a three-year...

On January 1, Year 1, Turner Company borrowed $58,000 from Lessing Inc. and signed a three-year installment note to be paid in three equal payments at the end of each year. The present value of an annuity of $1 for 3 periods at 7% is 2.62432. What is the amount of the installment payment?

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Expert Solution

Amount borrowed = $58,000

Number of annual payments (n) = 3

Interest rate (i) = 7%

Present value annuity factor (7%,3) = 2.62432

Annual installment payment x Present value annuity factor (7%,3) = Amount borrowed

Annual installment payment x 2.62432 = 58,000

Annual installment payment = 58,000/2.62432

= $22,100.96 (or $22,101 : if rounded off to two decimal)

ekkarill92 answered 2 years ago

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