Computing the Amount of Periodic Payments
Response to the following problem:
Howard Company has just borrowed $250,000. The loan is to be repaid in regular annual payments made at the end of each year.
What is the amount of each annual payment under the following sets of terms:
1. Interest rate of 8% compounded annually; repayment in four annual payments.
2. Interest rate of 7% compounded annually; repayment in eight annual payments.