The present value (PV) of an annuity of P equal periodic payments for n years at r% is given by:
[tex]PV=Pa_{n\rceil r}[/tex]
where [tex]a_{n\rceil r}[/tex] is the present value of an annuity factor for n years at r%.
Given that a
company borrowed $40,000 cash from the bank and signed a 6-year note at
7% annual interest and that the present value of an annuity factor for 6 years
at 7% is 4.7665.
Then
[tex]40000=4.7665P \\ \\ P= \frac{40000}{4.7665} =8,391.90[/tex]
Therefore, the annual annuity payments equals $8,391.90
