Question

# Canliss Mining Company borrowed money from a local bank. The note the company signed requires five...

Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of \$20,000 beginning one year from today. The interest rate on the note is 9%.(FV of \$1, PV of \$1, FVA of \$1, PVA of \$1, FVAD of \$1 and PVAD of \$1) (Use appropriate factor(s) from the tables provided.)

What amount did Canliss borrow? (Round your final answers to nearest whole dollar amount.)

 Table or calculator function: Payment: n = i = Present Value:

 We can use the present value of annuity formula to know the amount did Canliss borrow The formula is as under, PV of annuity = P *{[ 1 - (1+r)^-n ] / r} PV of annuity = borrowing amount = ? P = annual installment = \$20,000 r = annual interest rate on note = 9% n = no.of years = 5 PV of annuity = 20,000 *{[ 1 - (1+0.09)^-5 ] / 0.09} PV of annuity = 20,000 * 3.88965 PV of annuity = \$77,793 Amount borrowed by Canliss = \$77,793 or \$77,800(approx)

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