Question

Brian took eight years to pay off his $71,900 loan. The loan had an interest rate of 8.16%, compounded quarterly. If Brian paid quarterly and made the same payment every time, how much was each payment that he made?
a.
$2,342.66
b.
$3,081.54
c.
$1,022.28
d.
$1,466.76

Answer 1

Use the loan amortization formula A = P * r / (1 - (1 + r)^(-n)).

Here P = 71,900, r = 0.0816/4 = 0.0204 (quarterly), n = 8*4 = 32.

A = 71900 * 0.0204 / (1 - (1.0204)^(-32)) ≈ $3,081.54.

Answer: b.