Big Brothers Inc borrows 116601 from the bank at 673 percent

Big Brothers, Inc. borrows $116,601 from the bank at 6.73 percent per year, compounded annually, to purchase new machinery. This loan is to be repaid in equal annual installments at the end of each year over the next 5 years. How much will each annual payment be? Round the answer to two decimal places

Solution

Annual loan amount = $116,601

Annual interest rate = 6.73% = 0.0673

Number of annual loan payments = 5

Loan payment = (Loan amount * r) / ({1-(1+r)^-n}

Annual loan payment = ($116,601*0.0673)/(1-0.0673^-5) = $28,232.62