4. A homeowner has a ten‑year home-improvement loan for $36,875. What are the annual payments required...
4. A homeowner has a ten‑year home-improvement loan for $36,875. What are the annual payments required by the loan if the annual rate of interest is 4 percent?
SOLVE WITHOUT FINANCIAL CALCULATOR AND SHOW STEPS.
Homework Answers
Loan amount = $36,875
Time period = 10 years
Interest rate = 4%
Let annual payment be $x
$36,875 = $x/1.04 + $x/1.04^2 + … + $x/1.04^9 + $x/1.04^10
$36,875 = $x * (1 - (1/1.04)^10) / 0.04
$36,875 = $x * 8.110896
$x = $4,546.35
Annual payment = $4,546.35
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