Quantitative Problem: You need $11,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 9% annual return. What will be your annual loan payments

Question

Melanie Bond

Business

26 May, 14:38

Quantitative Problem: You need $11,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 9% annual return. What will be your annual loan payments

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Answers (1)

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Audrina Waters · Answer 1

The annual loan payments are closest to $3,395.36

Explanation:

The annual payment on the amortized loan can be ascertained using the pmt formula in excel:

=pmt (rate, nper,-pv, fv)

rate is the 9% annual return expected by the uncle

nper is the length of repayment which is 4 years

pv is the amount borrowed which is $11,000

fv is the future worth of the loan which is unknown

=pmt (9%,4,-11000,0) = $3,395.36