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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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  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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