To repay a loan of $20,000, a series of nineteen level payments is to be made with the first payment in one year and each subsequentpayment two years after the preceding one. The annual effective interest rate is 3.5%.Find the payment amount.Possible AnswersA $1,459B $1,685c $1,729D $1,887E $1,953

Generally loans are paid by annual payments that carry the payment for loan and payment for interest…

To repay a loan of $20,000, a series of nineteen level payments is to be made with the first payment in one year and each subsequen payment two years after the preceding one. The annual effective interest rate is 3.5%. Find the payment amount.

To repay a loan of $20,000, a series of nineteen level payments is to be made with the first payment in one year and each subsequen payment two years after the preceding one. The annual effective interest rate is 3.5%. Find the payment amount.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

To repay a loan of $20,000, a series of nineteen level payments is to be made with the first payment in one year and each subsequent
payment two years after the preceding one. The annual effective interest rate is 3.5%.
Find the payment amount.
Possible Answers
A $1,459
B $1,685
c $1,729
D $1,887
E $1,953

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