Question

You are thinking about buying a piece of art that costs $ 20,000. The art dealer is proposing the following​ deal: He will lend you the​ money, and you will repay the loan by making the same payment every two years for the next 10 years​ (i.e., a total of 5 ​payments). If the interest rate is 8 % per​ year, how much will you have to pay every two​ years?

Answer 1

Rate for two years = ((1+8%)^2-1) = 16.64% for 2 years

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate =	16.640000
FV = Future value =	$0
N = Total payment term x Frequency = 10 Years x 0.5 times = 5 =	5
PV = Present value of Loan =	-$20,000.00
CPT > PMT = Payment =	$6,199.63

Alternate formula-based method:         

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

Payment = 20000 x 16.64% x (1+16.64%)^5 / ((1+16.64%)^5 - 1) = $6,199.63