Question

n order to build a new warehouse facility, the regional distributor for Valco Multiposition Valves borrowed $1.6 million at 12% per year interest. If the company repaid the loan in a lump sum amount after 2 years, what was the amount of the payment

Answer 1

Answer:

the amount of the payment is $2,007,040

Explanation:

The computation of the amount of the payment is as follows:

= Borrowed amount × (1 + rate of interest)^number of years

= $1,600,000 × (1 + 0.12)^2

= $2,007,040

We simply applied the future value formula to determine the amount of the payment

Hence, the amount of the payment is $2,007,040