Question

You financed  $15,000  of furniture for your new home through your local credit union at  8%  per year compounded quarterly for 5 years. How much are your quarterly payments?

a) $907.35

b) $927.35

c) $957.35

d) $917.35

e) $937.35

f) None of the above.

Answer 1

As the compounding is done quarterly, lets convert all the data in quarterly figures:

• Present Value (PV) of furniture = $15,000
• Rate = 8% pa = 8%/4 per quarter
• Duration = 5 years = 5*4 quarters

Now we will use the PMT function in excel to solve this question:

Hence, the quarterly payments amount to $917.35.

The correct answer is Option D ($917.35)