Ordinary Annuity 2. A P35,000 debt is to be paid off in eight equal yearly payments, each combining an amortization installment and interest at 10% compounded quarterly. What should be the amount of each payment? (Use the given formula in the image below)

Ordinary Annuity 2. A P35,000 debt is to be paid off in eight equal yearly payments, each combining an amortization installment and interest at 10% compounded quarterly. What should be the amount of each payment? (Use the given formula in the image below)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1Q

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Question

#2 Ordinary Annuity

2. A P35,000 debt is to be paid off in eight equal yearly payments, each combining an amortization installment and interest at 10% compounded quarterly. What should be the amount of each payment?

(Use the given formula in the image below)

FORMULA
Future Worth
F = 4|(1+i)"_1]
Present Worth
A[(1+1)" –1]
i(1+1)"
P =
where:
F = Future Worth
A = Annuity
i = NR/m
n = tm
NR = Nominal Rate
m = total number of conversion periods in 1 year
t = number of years

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