Question

You borrow $400 promising to repay in 4 semi-annual installments at 6% (APR) (compounded monthly), how...

You borrow $400 promising to repay in 4 semi-annual installments at 6% (APR) (compounded monthly), how much are your payments?

Homework Answers

Answer #1

$ 101.25

Step-1:Calculation of equivalent semi annual interest rate
(1+i)^n = (1+i)^n Where,
(1+0.005)^6 = (1+i)^1 Monthly Interest rate = 6%/12 = 0.005
1.030378 = 1+i
0.030378 = i
So,
Semi annual equivalent interest rate = 0.030378
Step-2:Calculation of semi annual payment
Semi annual payment =-pmt(rate,nper,pv,fv) Where,
$ 101.25 rate = 0.005
nper = 4
pv = $ 400.00
fv = 0
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