Your brotherinlaw borrowed 1000 from you 10 years ago and th

Your brother-in-law borrowed $1,000 from you 10 years ago and then disappeared. Yesterday he returned and expressed a desire to pay back the loan, including the interest that accrued since he borrowed the money. Assuming that you had agreed to charge him 7%, and assuming that he wishes to make five equal annual payments beginning in one year, how much would your brother-in-law have to pay you annually in order to extinguish the debt? (Assume the loan continues to accrue interest at 7% per year.) Does anyone know how to arrive at this answer with a Ti BAII plus financial calculator?

Solution

Solution :

Loan + accrued interest (1000*1.07^10)

   1,967.15

PMT = P X r x (1+r)^n / ((1+r)^n - 1)

PMT=MONTHLY PAYMENT, P = Principal=1967.15 , r = interest rate=0.07,n=number of payment =5

=1967.15*.07*(1+.07)^5/((1+.07)^5 – 1)

=479.11