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31 August, 03:16

How much money would you have to pay each year in 8 equal payments, starting 2 years from today, to repay a $20,000 loan received from a relative today, if the interest rate is 8% per year?

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  1. 31 August, 05:03
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    The annual payment is $3,758.72

    Explanation:

    Amount borrowed = $20,000

    Annual Interest Rate = 8%

    Number of payments = 8

    Let annual payment be $R

    $20,000 = $R/1.08^2 + $R/1.08^3 + $R/1.08^4 + $R/1.08^9

    $20,000 = (1/1.08) * [$R/1.08 + $R/1.08^2 + $R/1.08^3 + $R/1.08^8]

    $20,000 = (1/1.08) * $R * (1 - (1/1.08) ^8) / 0.08

    $20,000 = $R*5.32096

    $R = $ 3,758.72

    Therefore, the annual payment is $3,758.72
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