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.