1.

Find the amount of each payment necessary to amortize the following loan.

A company borrows $84,700 for new equipment.

The company agrees to make quarterly payments for 9 years at 10% per year.

Find the amount of the quarterly payment.

The answer is $3,595.65.

We need to compute for the present value of the ordinary annuity. Use this formula Pv=pmt [ (1 - (1+r/k) ^ (-kn)) : (r/k) ]

Given:

Pv - 84,700

r - 10%

k - 4 since it's quarterly

n - 9 years

Required: pmt or the quarterly periodic payment; to find this transpose the formula to leave pmt variable on one side, substitute the values to the variables, then simplify

Solution:

pmt = Pv : [ (1 - (1+r/k) ^ (-kn)) : (r/k) ]

pmt = 84,700 : [ (1 - (1+0.10/4) ^ (-4*9)) : (0.10/4) ]

pmt = 3,595.65