Question

Knowledge Check 01 If you borrow $30,000 from the bank for 5 years (60 months) at 12% interest, you would calculate the payment required at the end of each month by: Multiple Choice Multiplying $30,000 by the procent value of $t, where -12% and 5 O Dividing $30,000 by the present value of an ordinary annuity of $t, where = 1% and n-60 O O Diding 530.000 by the present value of an ordinary annuity of St. where -12% and 5 O Dividing 530,000 by the future value of an ordinary annuity of St, where and 1 60 < Prev 12 of 2 Next

Answer 1

Dividing $30,000 by the future value of an ordinary annuity of $1, where i=1% and n=60

P = PMT x (((1 + r) ^ n – 1) / r)

Here variables represent:

• P = the future value of the annuity
• PMT = the value of each annuity.
• r = the interest rate
• n = the number of periods over which payments will be made