Solve the problem.
-Find the periodic payment of a loan with present value $1500 and an annual interest rate 8.9% for a term of 3 years, with payments made and interest charged 12 times per year.
A) $95.26
B) $47.63
C) $85.73
D) $38.10

Question

Quizplus · Accepted Answer

The periodic payment can be calculated using the formula for an ordinary annuity: PMT = P * (r(1+r)^n) / ((1+r)^n - 1), where P is the present value, r is the monthly interest rate, and n is the total number of payments. Here, P = $1500, the annual interest rate is 8.9%, so the monthly rate r = 0.089/12, and n = 3*12. Plugging these values into the formula gives the periodic payment of approximately $47.63.

Solve the Problem. -Find the Periodic Payment of a Loan with Present Value