1.      You plan to borrow $389,000 now and repay it in 25 equal annual instalments (payments will be made at the end of each year). If the annual interest rate is 14%, how much will your annual payments be?

To find the annual payment on a loan, we use the formula for the annuity payment:

\[
PMT = \frac{P \times r}{1 - (1 + r)^{-n}}
\]

Where:
- $ PMT $ is the annual payment
- $ P $ is the principal (loan amount) = $389,000
- $ r $ is the annual interest rate = 14% or 0.14
- $ n $ is the number of payments = 25

Plugging the values into the formula:

\[
PMT = \frac{389,000 \times 0.14}{1 - (1 + 0.14)^{-25}}
\]

Let's calculate this step-by-step.The annual payment you need to make is approximately $56,598.88.

Do you want more details on this calculation, or do you have any questions?

Here are 5 related questions for further exploration:
1. How would the payment change if the loan term was 30 years instead of 25 years?
2. What is the total amount paid over the life of the loan?
3. How much of the first payment goes toward interest, and how much toward the principal?
4. How does changing the interest rate to 10% affect the annual payment?
5. What would be the outstanding balance of the loan after 10 years of payments?

**Tip:** In an amortizing loan, early payments mostly cover interest, with later payments gradually paying more of the principal.

You plan to borrow $389,000 now and repay it in 25 equal annual instalments (payments will be made at the end of each year). If the annual interest rate is 14%, how much will your annual payments be?

Learn how to calculate the annual payments for a $389,000 loan with a 14% interest rate over 25 years. This detailed solution uses the annuity payment formula and covers key concepts like loan amortization and interest rate calculation. Ideal for finance students and individuals exploring loan repayment strategies.

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