what size payments should occur when 8000 is borrowed at 8% per year compounded quarterly and the loan is repaid with 24 equal monthly payments?
what size payments should occur when 8000 is borrowed at 8% per year compounded quarterly and the loan is repaid with 24 equal monthly payments?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 5P
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what size payments should occur when 8000 is borrowed at 8% per year compounded quarterly and the loan is repaid with 24 equal monthly payments?
Expert Solution
Step 1
Present value = pv = 8000
Time = t = 24 months
Interest rate = r = (1 + (0.08 / 4))^(4/12) - 1
= (1 + 0.02)^(1/3) - 1
= 1.00662270956 - 1
= 0.00662270956
= 0.66%
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