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The elkridge bar & grill has a seven-year loan of $23,500 with bank of america. it plans to repay the loan in seven equal installments starting today. if the rate of interest is 8.4 percent, how much will each payment be?

Respuesta :

Calculation of Annual Installment of loan:

In order to calculate the annual installment of the loan, we can use the formula of the annuity. According to the formula of annuity, the annual installment is calculated by dividing the present value of loan by the present value of annuity $1.

The present value of the loan is given $23,500

And present value of annuity $1 (at 8.4% for 7 years) shall be 5.1359

Hence, Annual Installment of the loan shall be 23500/5.1359 = 4,575.63


Hence, each annual payment shall be $4,575.63