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 A debt is being payed off with equal payments of $2000 at the end of each quarter for two years. If interest on the debt is charged at 8% pe

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A debt is being payed off with equal payments of $2000 at the end of each quarter for two years. If interest on the debt is charged at 8% per annum compounded quarterly, calculate the principal outstanding (amount owing) when the fourth payment has just been made.

math
 Aug 14, 2014

Best Answer 

 #1
avatar+118723 
+5

R=2000

n=4  (because 4 payments left)

i = 2% = 0.02

This is the present value of an ordinary annuity problem.

$$\boxed{A=R\times \frac{1-(1+i)^{-n}}{i}}\\\\
A=2000\times \frac{1-1.02^{-4}}{0.02}\\\\
A=\$7615.46$$

 Aug 14, 2014

1+0 Answers

 #1
avatar+118723 
+5
Best Answer

R=2000

n=4  (because 4 payments left)

i = 2% = 0.02

This is the present value of an ordinary annuity problem.

$$\boxed{A=R\times \frac{1-(1+i)^{-n}}{i}}\\\\
A=2000\times \frac{1-1.02^{-4}}{0.02}\\\\
A=\$7615.46$$

Melody Aug 14, 2014

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