Question

Erindale Bank offers you a $49,000, four-year term loan at 7.0% annual interest. What will your annual loan payment be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual loan payment

Answer 1

The annual loan payment will be $14,315.61.

Step-by-step explanation:

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

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

Where PMT is the annual loan payment, PV is the loan amount, R is the interest rate per period (in this case, 7% divided by the number of periods in a year), and n is the total number of payment periods (in this case, 4 years multiplied by the number of periods in a year).

Plugging in the values, we get:

PMT = $49,000 * (0.07 / 1 - (1 + 0.07)^(-4))

Calculating this, the annual loan payment will be $14,315.61.

Answer 2

To determine the annual loan payment for a $49,000, four-year term loan at 7.0% annual interest, one would apply the annuity formula, resulting in approximately $27,097.26 as the annual payment.

Step-by-step explanation:

To calculate the annual loan payment of a $49,000 four-year term loan at 7.0% annual interest, we use the formula for an annuity, which is P = (r*PV)/(1 - (1 + r)^-n), where P is the payment, r is the interest rate per period, PV is the present value or principal, and n is the number of periods.

In this case, the principal PV is $49,000, the annual interest rate r is 7.0% or 0.07, and the number of periods n is 4 years since it's an annual payment. After calculating, we use the annuity formula to get the annual loan payment.

Calculation:

P = (0.07 * $49,000) / (1 - (1 + 0.07)^-4)

P = $3,430 / (1 - 0.873439)

P = $3,430 / 0.126561

P = $27,097.26 (rounded to two decimal places)

Therefore, the annual loan payment will be $27,097.26.