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□ Mr. Mannan borrow Tk. 5,00,000 from a bank for purchasing a shop. If he pays...

□ Mr. Mannan borrow Tk. 5,00,000 from a bank for purchasing a shop. If he pays annual equal installments for 10 years at 8% interest rate on outstanding balance. Then what is the installment amount if he make installment at the end of each year?
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Answer #1

Using financial calculator to calculate the installment amount

Inputs: N= 10

   I/y= 8%

Pv= -5,00,000

Fv= 0

Pmt= compute

We get, installment per year as TK.74,514.74

or

Present value of annuity= pmt × (1 - (1+r)^-n) / r

5,00,000 = pmt × (1- (1+0.08)^-10)/0.08

5,00,000 = pmt × (1 - (1.08)^-10)/0.08

5,00,000 = pmt × (1 - 0.4632)/0.08

5,00,000= pmt × 0.5368/0.08

5,00,000 = pmt × 6.7101

Pmt = 5,00,000 / 6.7101

Pmt = TK74,514.74

Therefore, installment amount is Tk 74,514.74

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