What would be the amount to debt owed today

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Reference no: EM133000673

Happy and Happy (HH) Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt.

Year 0 (Today): 20,000
Year 1: 25,000;
Year 2: 30,000;
Year 3: 35,000;
Year 4: 35,000;

Problem (1) If the appropriate interest rate that bank is charging is APR 7% annual compounding, what would be the amount to debt owed today?

Problem (2) If HH can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 7% annual interest rate, what would be the amount of yearly payment?

Problem (3) If the bank accepts HH proposal in (2), what would be the interest amount paid to the bank in the first year?

Reference no: EM133000673

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