Question

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?

Answer 1

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