Find the payment necessary to amortize the loan.
11) $ 1500; 6% compounded annually; 7 annual payments 11) _____
A) $ 271.33 B) $ 241.55 C) $ 305.05 D) $ 268.70
To find the payment necessary to amortize the loan, you can use the amortization formula.
The formula for calculating the payment necessary to amortize a loan is:
P = (r * PV) / (1 - (1 + r)^(-n))
Where:
P = Payment
r = Interest rate per period
PV = Present value or principal amount
n = Number of periods
In this case, the principal amount is $1500, the interest rate is 6%, and there are 7 annual payments.
First, we need to convert the interest rate to a decimal and divide it by the number of payment periods per year. Since the interest is compounded annually, the number of periods per year is also 1.
r = 6% / 100% = 0.06
Next, substitute the given values into the formula:
P = (0.06 * 1500) / (1 - (1 + 0.06)^(-7))
Now, we can solve for P using a calculator or spreadsheet.
P ≈ $271.33 (rounded to the nearest cent)
Therefore, the payment necessary to amortize the loan is approximately $271.33.
The correct answer is A) $271.33.