Carol Thomas will pay out $6,000 at the end of the year 2, $8,000 at the end of year 3, and receive $10,000

Carol Thomas will pay out $6,000 at the end of the year 2, $8,000 at the end of year 3, and receive $10,000 at the end of year 4. With an interest rate of 13 percent, what is the net value of the payments vs. receipts in today's dollars?

A. $7,326.
B. $10,242.
C. $16,372.
D. $4,112.

PV = FV x PVIF (App. B: 13%, 2 periods)
= $6,000 x .783 = $4,698
PV = FV x PVIF (App. B: 13%, 3 periods)
= $8,000 x .693 = $5,544
PV = FV x PVIF (App. B: 13%, 4 periods)
= $10,000 x .613 = $6,130
Net Value of Payments = ($4,698) + ($5,544) + $6,130 = $4,112

John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

A. $3,633
B. $9,250
C. $13,113
D. $15,445

PV_A = A ´PV_IFA (App. D: 6%, 15 periods)
= $150,000 ´ 9.712 = $15,445

John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. What is the principal outstanding after the first loan payment?

A. $143,555
B. $134,560
C. $141,200
D. None of these

PV_A = A ´PV_IFA (App. D: 6%, 15 periods)
= $150,000 ´ 9.712 = $15,445
Annual Payment - Interest = Amount to be applied to principal
$15,445 - (.06)($150,000) = $6,445
Outstanding principal at end of year 1 = Loan - Payment to principal
= $150,000 - $6,445
= $143,555