Your client is considering the purchase of a painting for $20,000. The art dealer will finance...
Your client is considering the purchase of a painting for $20,000. The art dealer will finance the purchase at 8% compounded quarterly for six (6) years, What payment must your client make at the End of each quarter to the art dealer? a. $2,049 b. $1,057 c. $2,131 d. $1,037
Homework Answers
Rate = 8% / 4 = 2%
Number of periods = 6 * 4 = 24
Present value = Annuity * [1 - 1 / (1 + r)n] / r
20,000 = Annuity * [1 - 1 / (1 + 0.02)24] / 0.02
20,000 = Annuity * [1 - 0.621721] / 0.02
20,000 = Annuity * 18.913926
Annuity = $1,057
Quarterly payment will be $1,057
You can also find this using a financial calculator:
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