Question

You receive a $16,000 4-year constant payment loan (CPL). The loan's annual interest rate is 8%. What is the principal portion of the total payment in year 4, rounded to the nearest dollar?

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

16000= Cash Flow*((1-(1+ 8/100)^-4)/(8/100))

Cash Flow = 4830.73

Using Calculator: press buttons "2ND"+"FV" then assign

PV =-16000

I/Y =8

N =4

FV = 0

CPT PMT

Using Excel

=PMT(rate,nper,pv,fv,type)

=PMT(8/(100),4,,16000,)

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 4830.73*((1-(1+ 8/100)^-1)/(8/100))

PV = 4472.9

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =4830.73

I/Y =8

N =1

FV = 0

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(8/(100),1,,PV,)