Question

You need $13,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 6% annual return.

Answer 1

$3,837.97

Step-by-step explanation:

The formula for computing the annual loan payments is provided and explained below:

PMT=P(r/n)/1-(1+r/n)^(-nt)

P=loan amount=$13,000

r=interest rate=6%

n=number of payments in a year=1

t= duration of loan=4 years

PMT= 13,000*(7%/1)/(1-(1+7%/1)^(-1*4)

PMT=13000*0.07/(1-(1.07)^-4

PMT=910 /(1-0.762895212 )

PMT=910 /0.237104788

PMT=$3,837.97