Beta purchased a piece of equipment at a cost of $25,000. To finance the purchase, he signed a five-year promissory note, which requires five equal annual payments. Beta will make the first payment within a year. Each payment will be in the amount of $6,935.

a. Determine the interest rate on this note. round.

b. Prepare the Beta wage entries for the first payment and for the last payment.

c. Suppose that immediately after making the second payment, Beta refinances and signs a new three-year note for the amount owed on the first note and the interest rate is 9.25%, what will be the annual payment on the new note?

Suppose that the payment from the previous question carries an interest rate of 11% and Beta will pay $5,500 per year over the five years of the note. At the end of year 5, in addition to the $5,500, Beta will pay an additional (residual) amount.

1) What additional amount will Beta have to pay to pay off the promissory note?

2) How much will Beta owe after making the third annual payment?