Question

Your brother-in-law borrowed $1,000 from you 10 years ago and then disappeared. Yesterday he returned and expressed a desire to pay back the loan, including the interest accrued. Assuming you had agreed to charge him interest of 7.00% per year, and that he wishes to make five equal annual payments beginning in one year, how much would your brother-in-law have to pay annually (rounded to the nearest dollar) to extinguish the debt

Answer 1

$479.11

Step-by-step explanation:

Loan + Accrued interest (1000*1.07^10) = 1,967.15

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

PMT=Monthly payment , P = Principal=1967.15 , r = interest rate=0.07,n=number of payment =5

PMT=1967.15*.07*(1+.07)^5/((1+.07)^5 – 1)

PMT = 479.11