First use the formula of the future value of an annuity ordinary to find the yearly payments Fv=pmt [(1+r)^(n)-1)÷r] Fv future value 40000 PMT yearly payment? R interest rate 0.02 N time 8 years Solve the formula for PMT PMT=Fv÷[(1+r)^(n)-1)÷r] PMT=40,000÷(((1+0.02)^(8)−1) ÷(0.02)) =4,660.39
Now use the formula of the present value of an annuity ordinary to find the present value Pv=pmt [(1-(1+r)^(-n))÷r] PV present value? PMT yearly payments 4660.39 R interest rate 0.02 N time 8 years Pv=4,660.39×((1−(1+0.02)^(−8))÷(0.02)) pv=34,139.60. ....answer
