Use the following to answer questions
Present and future value tables of $1 at 3% are presented below:

-Micro Brewery borrows $300,000 to be paid off in three years.The loan payments are semiannual with the first payment due in six months,and interest is at 6%.What is the amount of each payment?
A)$ 55,379.
B)$106,059.
C)$ 30,138.
D)$ 60,276.

Question

Use the following to answer questions 
Present and future value tables of $1 at 3% are presented below:
 
-Micro Brewery borrows $300,000 to be paid off in three years.The loan payments are semiannual with the first payment due in six months,and interest is at 6%.What is the amount of each payment?
A)$ 55,379. 
B)$106,059. 
C)$ 30,138. 
D)$ 60,276.

Quizplus · Accepted Answer

The correct answer is A because the amount of each payment is $55,379. This can be calculated using the formula for the present value of an annuity, which is:PV = PMT * [1 - (1 + r)^-n] / rwhere:PV is the present value of the annuityPMT is the amount of each paymentr is the interest rate per periodn is the number of periodsIn this case, the present value of the annuity is $300,000, the interest rate is 6% per year, and the number of periods is 6 (since there are 3 years with semiannual payments). Plugging these values into the formula, we get:$300,000 = PMT * [1 - (1 + 0.06/2)^-6] / (0.06/2)$300,000 = PMT * [1 - (1.03)^-6] / 0.03$300,000 = PMT * 5.2421PMT = $300,000 / 5.2421PMT = $55,379

Use the Following to Answer Questions