The interest rate charged on a loan of $85,000 is 7.75% compounded annually. If the loan...

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Question

The interest rate charged on a loan of $85,000 is 7.75% compounded annually. If the loan is to be paid off over seven years,

business finance

Answer 1

Answer #1

Present value = Annuity * [1 - 1 / (1 + r)^n] / r

85,000 = Annuity * [1 - 1 / (1 + 0.0775)^7] / 0.0775

85,000 = Annuity * [1 - 0.593033] / 0.0775

85,000 = Annuity * 5.251184

Annuity = $16,187

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Answer 2

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