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11 September, 07:06

Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. how large would your payments be?

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  1. 11 September, 10:44
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    Use the formula of the present value of annuity ordinary.

    The formula is

    Pv=pmt [ (1 - (1+r) ^ (-n)) : r]

    Pv present value 12000

    PMT payment per year?

    R interest rate 0.09

    N time 4years

    We need to solve for pmt

    PMT=pv:[ (1 - (1+r) ^ (-n)) : r]

    PMT=12,000: ((1 - (1+0.09) ^ (-4)) : (0.09))

    PMT=3,704.02
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