Mr. Smrdelj took a loan of $4,200 and arranged to repay the loan with 3 equal
payments of $PMT at the end of 4, 8, and 12 months respectively. If the lender charges
a rate j12 = 12%.
What is the value of each payment ($PMT)?
A. $1,290.30
B. $1,719.02
C. $1,515.20
D. $1,400.00
On a time graph, pick a focal point and "move" all monies to that time point.
I picked now , or 0 on the time graph.
i = .12/12 = 0.01
4200 = PMT(1.01)^-4 + PMT(1.01)^-8 + PMT(1.01)^-12
4200 = PMT(1.01^-4 + 1.01^-8 + 1.01^-12)
4200 = PMT(2.771912...)
PMT = 1515.20