Please elaborate step by step the pmt(annuity) calculation for this problem
Homework Answers
Answer:
The principal amount is $250,000
Interest rate is 8% per year and the number of payments in a year is two times.
so we have to split the interest rate as per the number of payments in a year = 4% (8%/2)
Total number of payments is 6 times (3years*2)
Now need to apply the discount rate (4%) to calculate the payment amount.
The payment amount of $47,690 can be calculated using excel formula as above int the question.
Excel formula takes splitted interest rate (4%) and number of times payments need be made.
The payment also can be calculated Manually :
1. Find the PV Annuity for 4%, period 6 times (this can be find in annuity table) = 5.2421
2. Divide the principal amount with the PV factor = $250,000/5.2421
= $47,690
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