Question

Find the amount of each payment necessary to amortize the following loan.

A company borrows $84,700 for new equipment.
The company agrees to make quarterly payments for 9 years at 10% per year.
Find the amount of the quarterly payment.

Answer 1

Use the formula of the present value of annuity ordinary
The formula is
Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)]
Pv present value 84700
Pmt payment per quarter ?
R interest rate 0.10
K compounded quarterly 4
N time 9 years
We need to solve for pmt
Pmt=pv÷ [(1-(1+r/k)^(-kn))÷(r/k)]
Pmt=84,700÷((1−(1+0.10÷4)^(−4
×9))÷(0.10÷4))=3,595.65

Hope it helps