Question

New Body, a gym, bought new exercise equipment on credit. The purchase price was $10,438.88. They secure the loan with a financing company that charges 6.25% per year compounded quarterly for 6 years. How much are their quarterly payments?

Present Value with compound interest
Future V alue of an Annuity
Present V alue of an Annuity
Amortization
Sinking Fund

a. $578.41
b. $524.94
c. $503.78
d. $612.94
e. $486.78

Answer 1

b. $524.94

Step-by-step explanation:

We need to solve for the PTM of a 6 year annuity with quarterly payment discount for 6.25% compounding quarterly as well:

`PV / (1-(1+r)^(-time) )/(rate) = PTM\\`

PV $10,438.8800

time 24 (6 years x 4 quarter per year)

rate 0.015625 8 ( 0.0625 / 4 )

The payment every quarter will be for:

`10438.88 / (1-(1+0.015625)^(-24) )/(0.015625) = PTM\\`

PTM $ 524.942