Answer to Question #153042 in Financial Math for Mar

Question

Loan - EUR 2,500
issued for 6 years
compound interest rate of 7.76%,
What is the amount of the periodic payment which is made at the beginning of the year?

If the money were paid at the end of each year, what would be the result?

Answer 1

PV=2500

at the beginning of the year:

$PV=C[\frac{1-(1+r)^{-n}}{r}]\times(1+r)$

$2500=C[\frac{1-(1+0.0776)^{-6}}{0.0776}]\times(1+0.0776)$

$C=\frac{2500}{5.01806503}=498.2$

at the end of each year:

$PV=C[\frac{1-(1+r)^{-n}}{r}]$

$2500=C[\frac{1-(1+0.0776)^{-6}}{0.0776}]$

$C=\frac{2500}{4.65673159}=536.86$