# Lowlife Company defaulted on a $250,000 loan that was due on December 31, 2011. The bank has

## Question:

Lowlife Company defaulted on a $250,000 loan that was due on December 31, 2011. The bank has agreed to allow Lowlife to repay the $250,000 by making a series of equal annual payments beginning on December 31, 2012.

Required:

1. Calculate the required annual payment if the bank's interest rate is 10% and four payments are to be made.

2. Calculate the required annual payment if the bank's interest rate is 8% and five payments are to be made.

3. If the bank's interest rate is 10%, how many annual payments of $51,351 would be required to repay the debt?

4. If three payments of $104,087 are to be made, what interest rate is the bank charging Lowlife?

LOWLIFE COMPANY | |

Amount of loan | $ 250,000 |

Part 1: | |

Interest rate | 10% |

Number of payments | 4 |

Part 2: | |

Interest rate | 8% |

Number of payments | 5 |

Part 3: | |

Interest rate | 10% |

Annual payment amount | $ 51,351 |

Part 4: | |

Number of payments | 3 |

Annual payment amount | $ 104,087 |

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**Related Book For**

## Intermediate Accounting

**ISBN:** 978-0077400163

6th edition

**Authors:** J. David Spiceland, James Sepe, Mark Nelson