Question

Prescott Bank offers you a five-year loan for $57,000 at an annual interest rate of 6.5 percent. What will your annual loan payment be

Answer 1

$13716.17

Explanation:

The computation of annual loan payment is shown below:-

Present value of annuity = Annuity × (1 - (1 + interest rate)^-time period) ÷ rate

57,000 = Annuity × (1 - (1.065)^-5] ÷ 0.065

57,000 = Annuity × 4.155679438

Annuity = $57,000 ÷ 4.155679438

= $13,716.17

So we have applied the above formula.

By considering the given values