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Mr
Mr. Bill S.? Preston, Esq., purchased a new house for ?$140,000 He paid ?$15,000 upfront and agreed to pay the rest over the next 10 years in 10 equal annual payments that include principal payments plus 15 percent compound interest on the unpaid balance. What will these equal payments? be?
Mr. Bill S.? Preston, Esq., purchased a new house for ?$140,000 and paid $15,000 upfront. How much does he need to borrow to purchase the? house?
What will these equal payments? be?
Expert Solution
Computation of Annual Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Annual Payment = ?
Rate = 15%
Nper = 10 years
PV = $140,000-$15,000 = $125,000
FV = 0
Substituting the values in formula:
=pmt(15%,10,-125000,0)
PMT or Annual Payment = $24,906.51
So, he need to borrow $125,000 to purchase the? house.
Annual Payment is $24,906.51
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