How do you solve this?

Question

 

 

 

 

morales came into an inheritance of $28000 to be paid in equal monthly instalments for the next five years, starting one month from now. The money earns 5.75% compounded monthly. Determine the monthly instalment.

 

 

 

I have no idea what i am doing :(

Answer 1

This is an annuity problem with a per period interest rate of 5.75/12 or 0.004791667 and number of periods = 5*12 = 60

 

Where r = .0575/12 = 0.004791667

The formula is Present Value = PMT*(1/r)*(1-1/(1+r)^n) = PMT(1/.004791667)*(1-1/(1+.004791667)^60) = PMT * 52.03788634

Present Value = PMT * 52.03788634

PMT = Present value / 52.03788634 = $28,000/52.03788634 = $538.07 rounded to two places)

Monthly payment = $538.07 (rounded to two places)

Hope this helps