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?
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
