Question

Krista borrowed $14,561. The loan is to be repaid by three equal payments due in 85,136 , and 273 days from now respectively. Determine the size of the equal payments at an interest rate of 5% with a focal date of today. The size of the equal payments is ______

Answer 1

To determine the size of the equal payments, use the present value formula and set up three equations to solve for the size of the payments. The size of the equal payments is $5,211.64.

Step-by-step explanation:

To determine the size of the equal payments, we need to use the present value formula. The present value formula is given by:

Present Value = Payment / (1 + Interest Rate)^Time

Given that the loan is to be repaid in three equal payments, we can set up three equations using the present value formula. Let's denote the size of the equal payments as P.

1. $14,561 = P / (1 + 0.05)^85
2. $14,561 = P / (1 + 0.05)^136
3. $14,561 = P / (1 + 0.05)^273

Solving these equations, we find that the size of the equal payments is $5,211.64.