Answered: A sum of Rs 390200 is to be paid back…

A sum of Rs 390200 is to be paid back in three equal annual instalments. How much is each instalment, if the rate of interest charged is 4% per annum compounded annually ?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 5Q: If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

A sum of Rs 390200 is to be paid back in three equal
annual instalments. How much is each instalment, if the rate of
interest charged is 4% per annum compounded annually ?

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