Question

Linda takes out a loan today for $3500.00 with 5% interest compounded quarterly. She plans on paying back this loan with a quarterly payment at the end of each quarter for the next 5 years. Find the size of Linda’s quarterly payment.

Answer 1

$Present Value of Annuity = P * [( 1 - ( 1 +R)^-N) / R]$

Where, P = Payment

R = Rate of Interest Per period

N = Number of Period

$3500 = P * [( 1 - ( 1.0125)^-20) / 0.0125]$

$3500 = P * [( 1 - 0.7800085483) / 0.0125]$

$3500 = P *( 0.21999145167 / 0.0125)$

$3500 = P *17.5993161336$

$P = 3500 / 17.5993161336$

$P = 198.871363$

$Quarterly Payment = 198.871363$