Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $17,000 not due for three years. The interest rate on the note is 8%. (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? (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Step 1: Calculate the PV of the Ordinary Annuity Component: Payment: n = Present Value: Step 2: Convert the Annuity to a Single Sum: Payment: n = Present Value:
Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $17,000 not due for three years. The interest rate on the note is 8%. (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? (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Step 1: Calculate the PV of the Ordinary Annuity Component: Payment: n = Present Value: Step 2: Convert the Annuity to a Single Sum: Payment: n = Present Value:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
3.
Transcribed Image Text:Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments
of $17,000 not due for three years. The interest rate on the note is 8%. (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? (Do not round intermediate calculations. Round your final answers to nearest whole dollar
amount.)
Step 1: Calculate the PV of the Ordinary Annuity Component:
Payment:
n =
i =
Present Value:
Step 2: Convert the Annuity to a Single Sum:
Payment:
n =
i =
Present Value:
Expert Solution
Step 1
Present value of annuity is the current value of the future payments that are calculated using the interest rate or discount rate , the future cash flow is discounted to find the present value.
The formula of which is:
Present Value of periodic payment= P* (1- (1+r)-n)/r
Where,
P= periodic payments
r= rate of interest
n= number of period
And
Present Value of a single cash flow= Future Value / (1 + interest rate%)^n
Where,
n= number of period
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