Personal Finance 1st Edition by Jack R. Kapoor

Exercise 33

Determining a Loan Payment Amount. If you borrow $8,000 with a 5 percent interest rate, to be repaid in five equal yearly payments, what would be the amount of each payment? (Note: Use the present value of an annuity table in the chapter appendix.) (Obj. 4)

Step 1 of 2

If we borrow $8,000 with a 5 percent interest rate and repay in five equal yearly payments. The amount of each payment can be calculated by using present value of an annuity formula and table Exhibit 1-8-B.

Formula of Present value of an annuity:

Where,