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Kingsley Toyota borrowed $140,000 from a local bank. The loan requires Kingsley to pay 14 equal annual installments beginning one year from today. Assume an interest rate of 8%. What is the amount of each annual installment payment? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) (Round your final answers to nearest whole dollar amount.)

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Answer: $16,981.56

Explanation:

The payments are equal which means that this is an annuity.

The borrowed amount of $140,000 is the present value of this annuity assuming the annuity is paid in 14 years.

Present value of annuity = Annuity * (1 - ( 1 + rate) ^ -no. of periods) / rate

140,000 = Annuity * (1 - (1 + 8%)⁻¹⁴) / 8%

140,000 = Annuity * 8.24423698296

Annuity = 140,000 / 8.24423698296

= $16,981.56

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