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Assignment Help - homework help

Formula for the payment required for a car loan

Which formula would you employ to solve out for the payment required for a car loan if you know the interest rate, length of the loan, and the borrowed amount?  Describe.

To solve for k while the known values are PVA, n, and PMT, begin with the present value of an annuity formula, as follows:

Present Value of an Annuity Formula, Table Method

PVA = PMT(PVIFA k, n)

Next, rearrange terms and solve out for (PVIFA k, n) as follows

PVA / PMT = (PVIFA k, n)

Now refer to the PVIFA values in the text.  You know n, therefore find the n row corresponding to the number of periods in your problem on the left hand side of the table. You have also find out the PVIFA, therefore move across the n row until you determine (or come close to) the value of PVIFA that you have solved for.  The percent column wherein the value is located is the interest rate.

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