Question

Suppose you borrowed $13,230 at a rate of 15.0% and must repay it in 4 equal installments at the end of each of the next 4 years.  How large would your payments be?

Group of answer choices

$4,083.69

$4,173.68

$3,905.87

$3,994.41

$3,818.07

Answer 1

Annual loan payment

Loan amount (P) = $13,230

Annual interest rate (r) = 15.00% per year

Loan period (n) = 4 Years

The Annual Loan Payment = [P x {r (1+r) n}] / (1+r) n – 1

= [$13,230 x {0.15 x (1 + 0.15)4}] / [(1 + 0.15)4 – 1]

= [$13,230 x {0.15 x 1.74900625}] / [1.74900625 – 1]

= [$13,230 x 0.262350938] / 0.74900625

= $3,470.90 / 0.74900625

= $4,634.01

The annual payment is $4,634.01, but the answer is not given in the choices

Therefore, the Annual payment for the Loan is $4,634.01