Question #258971

Nihal is borrowing Rs. 50,000 to buy ABC assets. If he pays equal installments for 25

years and 4% interest on the outstanding balance, what is the amount of installment?

What shall be the amount of installment if quarterly payments are required to be made?

Expert's answer

Let's apply the formula for the annuity payment on the loan:

n=25

i=0.04

"x=S(i+\\frac{i}{(1+i)^n-1}=50000(0.04+\\frac{0.04}{(1+0.04)^{25}-1}=3200.60"

if quarterly payments:

"n=4\\times25=100"

"i=\\frac{0.04}{4}=0.01"

"x=S(i+\\frac{i}{(1+i)^n-1}=50000(0.01+\\frac{0.01}{(1+0.01)^{100}-1}=793.29"

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