Answer:
Present Value of he note 937,525
Explanation:
We do factor times annuity to get the PV of the annuity
3.9927 x 75,000 = 299,452.5
Then, we do payment over rate to know which principal generates this amount of interest
75,000/0.08 = principal = 937,500
And then we calcualte the PV of paying the principal in the future
937,500 x .6806 =638,062.5
Last step, we add both values together.
Principal present value 638,062.5 + Annuity Present value 299,452.5
Present Value of he note 937,525
The present value of note is $299,452.50 at the time of making series of payment, that is, at the present value annuity factor.
A note is an document where the drawer of the note agrees to make the reimbursement of the due amount to the payer in a defined period of time.
Given values:
Annual payment: $75,000
PV of annuity factor: 3.9927
Interest rate:8%
Time: 5 years
Computation of present value of the note:
[tex]\rm\ Present \rm\ Value \rm\ of \rm\ Note=\rm\ Annual \rm\ Payment \times \rm\ PV\rm\ Annuity \rm\ factor\\\rm\ Present \rm\ Value \rm\ of \rm\ Note=\$75,000\times\ 3.9927\\\rm\ Present \rm\ Value \rm\ of \rm\ Note=\$299,452.50[/tex]
Therefore, when the annual payment of$75,000 has been made with present value of annuity factor of 3.9927 then the present value comes out to be $299,452.50.
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