You are thinking about buying a piece of art that costs $ 20 comma 000. The art dealer is proposing the following deal: He will lend you the money, and you will repay the loan by making the same payment every two years for the next 30 years (i. e., a total of 15 payments). If the interest rate is 7 % per year, how much will you have to pay every two years?

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Business

Noah Lozano

12 December, 09:08

You are thinking about buying a piece of art that costs $ 20 comma 000. The art dealer is proposing the following deal: He will lend you the money, and you will repay the loan by making the same payment every two years for the next 30 years (i. e., a total of 15 payments). If the interest rate is 7 % per year, how much will you have to pay every two years?

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Denzel Douglas · Answer 1

This is an annuity question. You can solve this using a financial calculator with the following inputs;

Present value; PV = - 20,000

Duration; N = 15 payments

2 year interest rate; I = [ (1.07) ^2 ] - 1 = 14.49%

One-time future cashflow; FV = 0

Then compute recurring payment; CPT PMT = $3,336.28

Therefore, you'll pay $3,336.28 every 2 years