Use the formula for the present value of an ordinary annuity or the amortization formula to solve the following problem. PV=​$11,000​; PMT=​$500​; n=40​; i=​?

Question

Use the formula for the present value of an ordinary annuity or the amortization formula to solve the following problem.

PV=​$11,000​; PMT=​$500​; n=40​; i=​?

i= _________ ​(Type an integer or decimal rounded to three decimal places as​ needed.)

Answer 1

PV = PMT[1 - (1 + i)^{- n} - 1]/i; 11000 = 500[1 - (1 + i)^-40]/i; 22i = 1 - (1 + i)^-40

Using TI-84 we get i = 0.0331 = 3.31%