If you borrow $12,000 with an interest rate of 8 percent, to be repaid in five equal yearly payments at the end of the next five years, what would be the amount of each payment? Use the appropriate factor(s) from the tables provided (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)

Note: Use appropriate factor(s) from the tables provided. Round time value factor to 3 decimal places and final answer to 2 decimal places.

To calculate the annual payment amount for a loan using equal annual payments over a set period, we can apply the **present value of an annuity formula**. The formula to determine the equal payments is:

\[
PMT = \dfrac{PV}{PVA_{factor}}
\]

Where:
- $PMT$ is the annual payment
- $PV$ is the present value of the loan (\$12,000 in this case)
- $PVA_{factor}$ is the **present value annuity factor** based on the interest rate and number of periods

### Step 1: Find the Present Value Annuity Factor

You mentioned using the tables provided (Exhibit 1-A, Exhibit 1-B, etc.), but since they aren't given here, I’ll walk you through how to use the standard Present Value of an Annuity (PVA) factor.

The formula for the present value of an annuity factor is:

\[
PVA_{factor} = \dfrac{1 - (1 + r)^{-n}}{r}
\]

Where:
- $r = 0.08$ (the interest rate of 8%)
- $n = 5$ years (the number of periods)

### Step 2: Calculate the Annuity Factor

Let me calculate the factor first, then the annual payment.The present value annuity factor for an interest rate of 8% over 5 years is approximately **3.993**.

### Step 3: Calculate the Annual Payment

Now, using the formula for the annual payment:

\[
PMT = \dfrac{12,000}{3.993}
\]

Let me calculate that next.

If you borrow $12,000 with an interest rate of 8 percent, to be repaid in five equal yearly payments at the end of the next five years, what would be the amount of each payment? Use the appropriate factor(s) from the tables provided (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D).

Learn how to calculate equal yearly payments for a $12,000 loan with 8% interest over 5 years using the Present Value of an Annuity formula. This detailed solution explains how to use the appropriate factor from financial tables to find the exact payment amount.

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