You borrow $4750 at a rate of 6.72% compounded monthly. You make a partial payment of $1400 in 3 months. You also agree to make two equal payments 3 and 5 months after the partial payment. What is the size of the equal payments? Use a focal date of 8 months.
A) $1573.84
B) $1754.02
C) $1735.84
D) $1784.35
E) $1788.02

Question

Quizplus · Accepted Answer

Using the formula for present value of an annuity, we can set up the equation:

$3350 = P\left(\frac{1-(1+0.056/12)^{-2}}{0.056/12}\right)

Solving for P, we get P ≈ 1735.84, which is the size of each of the two equal payments.

You Borrow $4750 at a Rate of 6