Question

You are considering taking a 5-year, 10% annual interest rate loan of $8,339.73 which can be paid off with $2,200 year-end payments. What will be your payment each year if your payments were made at the start of each year over the next 5 years?

a) 1,950
b) $2,050
c) 2,000
d) 2,100
e) none

Answer 1

The payment each year for the 5-year, 10% annual interest rate loan of $8,339.73 will be $2,050.00.

Step-by-step explanation:

To calculate the payment each year, we can use the formula for the present value of an annuity:

PV = PMT * ((1 - (1+r)^(-n)) / r)

Where PV is the present value or loan amount, PMT is the payment, r is the interest rate per year, and n is the number of years.

In this case, the loan amount is $8,339.73 with an interest rate of 10% and a repayment period of 5 years. We want to find the payment per year.

Plugging in the values, we get:

$8,339.73 = PMT * ((1 - (1+0.1)^(-5)) / 0.1)

Simplifying the equation, we find:

PMT = $8,339.73 / ((1 - (1+0.1)^(-5)) / 0.1)

Calculating this, we get: PMT = $2,050.00