Question

You are taking a $4327 loan. You will pay it back in four equal amounts, paid every6 months, with the first payment occurring 5 years from now (the payments begin after 5 years). The annual interest rate is 14% compounded semiannually. Calculate the amount of each semiannual payment.

Answer 1

Let, equal 6 monthly payment = P

Semiannual R = 14%/2 = 7%

Then,

4327 = P/(1+7%)^10 +  P/(1+7%)^11 +  P/(1+7%)^12 +  P/(1+7%)^13

4327 = P*(1/(1+7%)^10 + 1/(1+7%)^11 + 1/(1+7%)^12 + 1/(1+7%)^13)

4327 = P*1.842418

P = 4327/1.842418

P = $2348.54

So, the each of 4 payment will be $2348.54.