A $3000 loan is to be repaid with quarterly payments or $R over five years,first payment due 3 months from now.What is R if j₂ = 10%?

Question

Quizplus · Accepted Answer

The loan repayment can be calculated using the formula for the present value of an annuity because the payments are made quarterly over five years, which equals 20 payments. The interest rate per quarter is 10%/4 = 2.5%. Using the formula $PV = R \times \frac{1 - (1 + i)^{-n}}{i}$, where PV = $3000, i = 0.025, and n = 20, solving for R gives approximately $191.89.

A $3000 Loan Is to Be Repaid with Quarterly Payments