Find the periodic payment that will render the sum:
-FV = $ 42,000, interest is 8% compounded monthly, payments made at the end of each month for 3 years
A) $ 3373.51
B) $ 1036.13
C) $ 2213.19
D) $ 12,433.54

Question

Quizplus · Accepted Answer

To find the periodic payment (PMT) for a future value (FV) annuity, where payments are made at the end of each period, we use the Future Value of an Ordinary Annuity formula: $FV = PMT \times \frac{[(1 + r)^n - 1]}{r}$, where FV is the future value, PMT is the periodic payment, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments (months). Given: FV = $42,000, annual interest rate = 8% (or 0.08), compounded monthly, so monthly interest rate $r = \frac{0.08}{12}$, and the total number of payments over 3 years (n = 3 years × 12 months/year = 36 months). Rearranging the formula to solve for PMT gives us $PMT = FV \times \frac{r}{[(1 + r)^n - 1]}$. Substituting the given values and solving for PMT yields approximately $1036.13.

Find the Periodic Payment That Will Render the Sum