A company borrows 50,000 yuan at the beginning of the year with a 10-year term and an annual interest rate of 12. If it is repaid in equal installments at the end of each year, the annual amount payable is 8,849 yuan.

Analysis:

We have learned from the question stem that the annuity present value coefficient (P/A, 12, 10) = 5.6502, and we also know the present value, term, profit, and calculation Annuity A. So:

A=P/(P/A, 12, 10)=50000/5.6502=8849 (yuan).

Extended information

The test point of this question is the flexible application of time value of money calculation.

A brief introduction to the theory of the time value of money:

Benjamin Frank said: Money begets money, and the money that is created begets more money. This is the essence of the time value of money.

Time value of money: The concept of time value of money holds that money currently owned has greater value than the same amount of money received in the future because money currently owned can be invested and compounded. Even with the effects of inflation, as long as investment opportunities exist, the present value of money must be greater than its future value.

The definition given by experts: The time value of money means that a certain amount of money currently held has a higher value than the same amount of money obtained in the future. From an economic point of view, the reason why the purchasing power of one unit of currency today is different from that of one unit of currency in the future is because to save one unit of currency now and not consume it but to consume it in the future, the future consumption must be greater than One unit of currency is available for consumption as a premium to compensate for delayed consumption.

Expression form:

1. Relative number: the social average capital profit rate under no risk and no inflation conditions; that is, the time value rate.

2. Absolute number: That is, the time value is the real value-added amount brought by funds in the production and operation process, that is, the product of a certain amount of funds and the time value rate.

Reference material comes from: Baidu Encyclopedia-Time Value of Money