Question

"If you borrow $8,000 with an interest rate of 4 percent, to be repaid in five equal yearly payments at the end of the next five years, what would be the amount of each payment? Use Exhibit 1-D. (Round time value factor to 3 decimal places and final answer to 2 decimal places.)"

Answer 1

Answer:

The payments will be of 1,797.02 dollars

Explanation:

We need tyo calcualte the PTM of an ordinary annuity which present value is 8,000. The time will be 5 years and the discount rate 4%

$PV \div \frac{1-(1+r)^{-time} }{rate} = PTM$

PV  $8,000.00

time 5 years

rate 4% = 4/100 = 0.04

$8000 \times \frac{1-(1+0.04)^{-5} }{0.04} = PTM$

PTM:  $ 1,797.017