19 May, 22:01

# You need \$20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 8% annual return. What will be your annual loan payments? Round your answer to the nearest cent. Do not round intermediate calculations

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Answers (1)
1. 19 May, 23:36
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The annualy payment for theamortized loan is \$6,802.44

Explanation:

First we will find the total loan payment TP for the \$20,000 borrowed over the next four years with a annual return of 8%:

TP = \$20,000 * (1+8%) ^4

TP = \$20,000 * (1.08) ^4

TP = \$20,000 * 1.3605 = \$27,209.7

The annual payments AN is obtained by dividing the TP into the 4 years:

AN = \$27,209.7 / 4 = \$6,802.44
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