You purchase a boat for $35,000 and pay $5,000 down. You also agree to pay the r

Question

You purchase a boat for $35,000 and pay $5,000 down. You also agree to pay the rest over the next 10 years in 10 equal end-of-the year payments plus 13 percent compound interest on the unpaid balance. What will be the amount of each payment? 5-6.(Present value of an annuity) What is the present value of the following annuities? a.$2,500 a year for 10 years discounted back to the present at 7 percent b.$70 a year for 3 years discounted back to the present at 3 percent c.$280 a year for 7 years discounted back to the present at 6 percent d.$500 a year for 10 years discounted back to the present at 10 percent

Explanation / Answer

Hi, if you like my answer please rate me lifesaver first. For the first part , the guy basically needs to pay $30,000, in 10 equal annual installments. Using the annuity formula with r = 13%, we get EMI = $5528.69 (so he needs to pay this amount annually for 10 years) Similarly using NPV formula a) PV = $17,558.95 b) PV = $198.00 c) PV = $1,563.07 d) PV = $3,072.28

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