Blossom Productions borrowed some money from the California Finance Company at a rate of 15.80 percent...

Blossom Productions borrowed some money from the California Finance Company at a rate of 15.80 percent for a seven-year period. The loan calls for a payment of $1,692,000 each year beginning today. How much did Blossom borrow? (Round factor values to 4 decimal places, e.g. 1.5214 and final answer to nearest whole dollar, e.g. 5,275.)

Please explain problem in detail. Thank you.

Solutions

Expert Solution

Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

=1.158*1,692,000[1-(1.158)^-7]/0.158

=1,692,000*4.7043

which is equal to

=$7959676(Approx)

jeff jeffy answered 2 years ago

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