The interest rate on a $100,000 loan is 7.5% compounded quarterly. What quarterly payments will reduce...
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The interest rate on a $100,000 loan is 7.5% compounded quarterly. What quarterly payments will reduce the balance to $75,000 after five years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
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| PMT | $ |
Homework Answers
Remaining balance after 5 years or 5*4 = 20 quarters is 75000
Interest rate per quarter is 7.5%/4 = 1.875%
Thus, we have
75000 = A(P/A, 1.875%, 20)
A = 75000(A/P, 1.875%, 20)
= 75000*0.060421
= $4,531.61
Hence, quarterly payments of $4,531.61 will reduce the balance to $75,000 after five years
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