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If you borrow $8,000 with an interest rate of 5 percent to be repaid in five equal payments at the end of the next five years, what would be the amount of each payment?

Respuesta :

Answer:

$1,848

Explanation:

The formula to compute the equal payments i.e we called PMT is shown below:

PMT = Present value ÷ Present value interest annuity factor for 5 years at 5%

= $8,000 ÷ 4.3295

= $1,848

For computing, the interest annuity factor refers to the PVIFA table

Simply we divided the borrowed amount by the PVIFA so that the approximate value can come

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