What payments? Zach Taylor is settling a $30,000 loan due today by making 6 equa
ID: 2378679 • Letter: W
Question
What payments?
Zach Taylor is settling a $30,000 loan due today by making 6 equal annual payments of $7,091.29.
What payments must Zach Taylor make to settle the loan at the interest rate of 11%, but with the 6 payments beginning on the day the loan is signed?(Round answer to 2 decimal places, e.g. 2,250.25. Hint: Use tables in text.)
Payments $ Zach Taylor is settling a $30,000 loan due today by making 6 equal annual payments of $7,091.29. What payments must Zach Taylor make to settle the loan at the interest rate of 11%, but with the 6 payments beginning on the day the loan is signed?(Round answer to 2 decimal places, e.g. 2,250.25. Hint: Use tables in text.)
Explanation / Answer
We have Loan amount = PV = 30,000
Annual Payment = PMT = 7091.29
No of periods = 6
So Interest rate on Loan = Rate(nper,pmt,pv,fv,type)
= Rate(6,7091.29,-30000,0)
= 11.00%
This was case of payment at end of year or Ordinary Annuity. Here Type = 0
When Payment is made at begining of Year, it is Annuity Due. So type =1
So Annual Payment = PMT(Rate,nper,PV,FV,type)
= PMT(11%,6,-30000,0,1)
= $6,388.56
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