Prescott Bank offers you a five-year loan for $75,000 at an annual interest rate of 6.8 percent. What will your annual loan payment be? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Y = $18,194.05

Explanation:

This is a form of annuity that involves payment of equal amounts monthly for 5 years. These amount are made up of part of the interest and part of the principal.

Using the annuity formula

P = Y{1 - (1/[1+r]^n) / r}

Where P = Initial loan amount

Y = yearly payment

r = interest rate

n = number of years

75,000 = Y{1 - (1/[1+0.068]^5) / 0.068}

75,000 = Y{1 - (0.719689) / 0.068} = Y{0.280311/0.068}

Y = 75,000/4.122227

Y = $18,194.05