You are borrowing $20,000 to buy a car. The terms of the loan call for quarterly...
You are borrowing $20,000 to buy a car. The terms of the loan call for quarterly payments for 5 years. You know that interest is compounded quarterly and that the effective annual rate is 15%. What is the amount of each payment?
Homework Answers
r = ((1+(I/n))^n) - 1
r = Effective Interest Rate
I = Interest Rate
n = period of compounding
Calculating the I with Effective Interest Rate r, using the formulae above.
I = 14.22%
3.56% is the interest for the period.
Calculating using the PMT Function on Excel
Putting rate = 3.56% NPER = 20, PV= -20000, FV= 0, Type 0
We will get the amount 1414.34
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