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Math Help - Simple Annuities

  1. #1
    Ife
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    Simple Annuities

    A loan of $20,000 is to be repaid by annual payments of $4,000 per annum for the 1st 5yrs, and payments of $4500 per yr thereafter for as long as necessary. Assuming that the effective rate of interest is 18%,

    Determine: a. The total number of payments. ; b. The amount of the smaller final, made one year after the last regular payment.

    I am not sure of the exact working, since there's an eff rate of interest as well, its confusing me.


    Help please?
    I am coming up with a number of 2.15 for the payments of 4500...
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  2. #2
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    Quote Originally Posted by Ife View Post
    I am not sure of the exact working, since there's an eff rate of interest as well, its confusing me.
    Shouldn't confuse you; 1st year's interest:
    20000*.18 = 3600
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